The Department for Work and Pensions (DWP) is sending letters to six million households between October and December about a £150 energy bill boost. The letters will either confirm that the recipient will receive that amount off their bill or invite them to call a helpline to check eligibility for the Warm Home Discount.
Scheme extended until 2031
The Government confirmed in January that the scheme would continue for the rest of the decade. It guarantees that eligible households will get the £150 rebate on energy bills every winter until 2031. Those entitled to the discount should receive the credit before March 31 next year.
In England and Wales, there is no need to apply for the scheme, but recipients may be asked to contact the Warm Homes Discount helpline to confirm some details. In Scotland, customers should check whether they need to apply through their supplier's Broader scheme or will receive it under the expanded Core Group.
Scam warning
It is important to remember that neither the Government nor energy watchdog Ofgem will contact households to ask for bank details. Recipients are warned to beware of clicking on links in suspicious emails and text messages.
Almost three million families were added to the scheme last year, with the total number of eligible households rising to about six million, according to the DWP.
Energy price cap rise
Former energy secretary Ed Miliband said that, when the scheme was extended, the move showed the Government was prioritising Britain's "affordability crisis". He said the Warm Home Discount would give families peace of mind that they would be supported and bills would be cut "for good".
Since then, households were hit with a 4% hike to Ofgem's energy price cap from October 1, with forecasters warning bills could soar by almost another £300 from January.
Ofgem launched a consultation on Friday on plans to reintroduce a measure to help protect energy suppliers from big swings in gas and electricity prices, leading to criticism that such a move would only push up prices to protect profits.
Market stabilisation charge
The energy watchdog said it was looking at activating its market stabilisation charge. This is designed to help prevent energy suppliers from collapsing when wholesale energy prices fall back sharply amid volatile markets. Suppliers can be left vulnerable when they have bought energy in advance at a high price and could then suffer financial losses if prices later tumble sharply and high numbers of customers switch to other firms in search of cheaper deals.
It works by ensuring the supplier which gains a customer through switching pays a charge to partially compensate the provider that lost the customer. The measure was previously put in place in April 2022 through to March 2024 following Russia's invasion of Ukraine, which sent energy markets reeling.
Ofgem said reactivating it would not automatically trigger charges or raise customer bills, stressing that payments between suppliers would only be made if wholesale prices fell sharply enough.
Martin Lewis, founder of MoneySavingExpert.com, warned it was a "form of switching penalty". He said: "In a nutshell, it means if wholesale energy prices drop sharply, the cheap fixes and switchers' deals offered will be a lot more expensive, in order to protect energy firms' profits. That's because any firm taking on a new customer, including on a cheap fix or other specialist tariff, will have to pay compensation to that customer's old supplier, if they switch. It's basically a form of switching penalty."
Neil Kenward, Ofgem's Interim Director General of Markets, said: "We're preparing for what is likely to be a difficult winter for many households. While the energy market is stronger than it was during the energy crisis, volatility remains and the market stabilisation charge helps to protect consumers from that volatility."
He added: "In volatile market conditions, it's important that suppliers can continue to secure the energy their customers need without taking unsustainable risks. By acting now, we can help maintain a stable and resilient energy market and protect consumers from the costs and disruption that can arise when markets become unstable."
Lewis said: "This is a 'market stabilisation charge' but the supplier market is pretty stable, and I doubt we are at the domino risk of suppliers going bust in the way they did in the early 2020s. A good few energy firms have made large profits since then and protecting them over winter by effectively dampening competition because it's 'not their fault' feels raw."
