The Government has issued a direct instruction to major energy suppliers, demanding they ensure millions of households on fixed-term contracts benefit from a promised £150 reduction in their annual bills.
Budget Pledge to Ease Cost of Living
Chancellor Rachel Reeves used last week's Budget to confirm her intention to lower energy costs and help alleviate the ongoing cost of living pressure. She announced that average household energy bills are set to decrease by £150 from April.
Ms Reeves stated this saving would be achieved by scrapping the Energy Company Obligation (Eco) scheme, which she said had been adding an extra £1.7 billion a year to household costs.
Formal Call to Include Fixed Tariffs
On Wednesday 03 December 2025, Energy Secretary Ed Miliband formally wrote to energy companies, urging them to pass on the full benefit of this reduction to consumers currently locked into fixed energy tariffs.
These fixed deals guarantee a set unit rate and standing charge for a contract period, usually a year or more. This differs from standard variable tariffs, where prices can fluctuate with wholesale market costs.
In his letter, Mr Miliband wrote: "This Government has made a clear commitment to cut people’s bills and help ease the financial pressure on millions of families... We want to set out our clear expectation that every single penny of our intervention at this Budget is passed on to consumers, including those on existing fixed term tariffs."
He emphasised that around 37% of the market is now on a fixed-term tariff and insisted they must see the reduction.
Industry Response and Customer Impact
According to the latest Ofgem figures, approximately 21 million domestic energy accounts are on fixed tariffs, while about 34 million remain on standard variable rates.
Ned Hammond, deputy director of customer policy at Energy UK, which represents suppliers, welcomed the Budget move. He said: "The energy industry has long called for Government action to reduce costs... suppliers will of course look to pass on the savings."
However, he also cautioned that some new costs might be added to bills in the coming months. Mr Hammond noted that while most customers are on the price cap set by Ofgem, suppliers set their own fixed tariffs to compete, giving them a strong incentive to pass on any cost reductions.
The Government's intervention signals a firm stance on ensuring its budgetary measures translate into direct financial relief for all consumers, regardless of their tariff type.
