Households could see around £145 a year in policy costs cut from energy bills in April under measures announced in the Chancellor’s Budget. This puts Cornwall Insight’s latest April 2026 forecast at £1,675 per year for a typical dual fuel consumer1.
The Chancellor has announced that 75% of the costs for the Renewables Obligation, which places an obligation on electricity suppliers to procure a proportion of electricity from renewable sources, will be taken off household energy bills for three years starting April 2026. We forecast that this will save approximately £78 per household per year.
The Budget also confirmed that the Energy Company Obligation (ECO), that requires large energy suppliers to help low-income households increase their energy efficiency and cut their heating bills, would not be extended past March 2026. We forecast that this would save approximately £67 per year for households from April.
The changes would take our April 2026 forecast to £1,675 per year for a typical dual fuel consumer. The reduction in RO and ECO will mitigate the previously announced rises in other costs such as funding to pay for upgrades to the network.
With three months before Ofgem sets the official level, further movements in wholesale and non-wholesale costs are likely.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight:
“Lower bills are always welcome, but we need to be realistic about what these measures achieve. Shifting some levies around does not remove the costs of running and decarbonising our energy system, it simply changes how they’re paid for.
“While it may take the sting out of energy bills right now, these costs will need to be picked up elsewhere. Moving them to general taxation may mean those paying more tax shoulder a bigger share, so you could say it spreads the burden. But for most households, it won’t make a huge difference to what’s in their pocket.
“Removing the Energy Company Obligation, a scheme designed to tackle fuel poverty, without confirming what will replace it also leaves a worrying gap for those already struggling. The expanded Warm Home Discount will offer some relief, but households need clarity and confidence about long-term support.
“The long-term solution is a low carbon system that delivers stability and protects us from the volatility of fossil fuel prices. That takes serious upfront investment and an honest conversation about how we share those costs fairly. Quick fixes may grab headlines and make bills look better today, but they do not solve the affordability challenge for tomorrow.”
Reference:
1. Ofgem’s Typical Domestic Consumption Values (TDCVs), are set at 2,700 kWh per annum for electricity, and 11,500 kWh per annum for gas.
