Energy Company Obligation scheme to be scrapped as part of autumn budget

The government has today revealed that the Energy Company Obligation will be scrapped as part its Autumn Budget, which particularly focused on tackling the high cost of living across the UK.

The government’s election manifesto pledge to reduce energy bills by £300 per year by 2030 has been under scrutiny, and it hopes that this is one way that the reduction can be at least partially achieved. Removing the fees added to bills to cover the Energy Company Obligation will save £150 per year for households.

There had been speculation that the government would cut VAT on energy bills, which would reduce them by 5%, but this hasn't come to fruition.

What is the Energy Company Obligation?

The ECO scheme was introduced to make it easier for energy customers to make their homes more energy-efficient with financial assistance from energy suppliers.

The scheme has one main part: the Home Heating Cost Reduction Obligation, where suppliers must actively help low-income, fuel-poor and other vulnerable households to effectively heat and insulate their homes. The overall target is divided between suppliers based on each one's share of the domestic energy market.

What will the effect on customers be?

Removing the ECO scheme will be beneficial for customers when it comes to bills - though the measure won’t cut bills by the full £300 promised.

In the longer term, it is likely to hit customers who might now be unable to install energy-efficient improvements to their home. The government will have to find alternative ways of funding these projects, otherwise the short-term impact of lower bills could be negatively offset by higher bills associated with homes that aren’t energy-efficient.