Government Moves to Ease Energy Bills by Covering Policy Costs

In yesterday’s Autumn Budget, Chancellor Rachel Reeves announced a significant policy shift aimed at reducing household energy bills by approximately £150 per year. The government will partially fund the Renewables Obligation (RO) scheme from 2026 to 2029, at an estimated cost of £2.3 billion to the Treasury. This marks a decisive step toward alleviating the burden of green levies on consumers.

Currently, the RO scheme, designed to support renewable energy generation, places costs on electricity suppliers, which are then passed on to households. Under the new plan, the government will cover 75% of domestic RO costs through 2029, reducing the financial pressure on consumers while maintaining support for clean energy.

The announcement follows growing calls from industry bodies and analysts to shift policy costs from energy bills to general taxation. Advocates argue this approach will make electricity more affordable, accelerate the adoption of heat pumps and electric vehicles and strengthen the UK’s energy transition.

However, this measure does not extend to industrial energy bills, which remain a contentious issue for manufacturers seeking to decarbonise operations. The government’s decision also comes amid criticism of excessive profits within the energy sector, with recent data showing companies posted over £30 billion in profits in 2024, three times the national average.

Legal and Regulatory Implications

For energy companies and investors, this policy adjustment signals a recalibration of cost distribution in the market. While consumer relief is welcome, firms should prepare for potential changes in compliance obligations and contractual frameworks related to subsidy schemes. 

Additionally, stakeholders should monitor whether similar reforms will be introduced for industrial consumers, as pressure mounts to level the playing field.

At Energy Solicitors, we continue to advise clients on navigating these evolving regulatory landscapes, ensuring compliance while identifying opportunities within the UK’s clean energy transition.