Key facts
- Andy Burnham is considering plans to cut household energy bills by approximately £130 annually.
- The proposed reforms involve changing how household gas is charged and removing policy levies from bills.
- The aim is to make electricity cheaper than gas, encouraging the adoption of heat pumps.
- The cost of the proposed package is estimated at £3.2 billion a year to the taxpayer.
- Nesta, a thinktank, proposed wiping out consumer electricity debts at a one-off cost of £2.7 billion.
- The standing charge on gas bills, which disproportionately affects low-income households, would be reformed.
Prime Minister Andy Burnham is reportedly considering significant reforms to the UK's energy market aimed at reducing household bills. Proposals being examined by his team, developed by the thinktank Nesta, could lower average annual bills by approximately £130. These changes would involve altering the way household gas is charged and shifting policy levies, such as those for renewable energy subsidies, from electricity bills to general taxation. This would make electricity cheaper relative to gas, incentivizing the adoption of cleaner heating solutions like heat pumps.
Nesta's plan also includes a one-off cost of £2.7 billion to eliminate the backlog of consumer electricity debts, which would save households an additional £29 annually. The reforms target the controversial standing charge on gas bills, which currently penalizes lower-income households, by shifting these grid maintenance costs to higher-income households that consume more gas. This shift is expected to save 84% of the poorest households around £22 per year.
Overall, Nesta calculates that the combined measures could save households about £130 annually, with further savings for those switching to electric alternatives. The proposals come as energy bills are expected to rise this winter due to global events, and follow similar measures proposed by former Chancellor Rachel Reeves. Burnham's team is expected to announce a cost-of-living package soon, with potential funding for these reforms to be addressed in the upcoming budget.