ECO funding to end from 31 March 2026

Funding for the Energy Company Obligation (ECO) will end from 31 March 2026, the government has announced as part of the Autumn Budget¹. The scheme requires energy suppliers to help households reduce the cost and carbon emissions of their home heating by fitting energy-saving measures, with a focus on low-income households and those in vulnerable situations¹. The same Budget set out changes to the Renewables Obligation (RO), a scheme designed to encourage electricity generation from eligible renewable sources in the UK, with 75% of RO costs to be funded from general taxation rather than through energy bills¹.

Both schemes are currently funded through costs added to energy bills, and the savings are expected to be reflected in bills from April 2026¹. The government has estimated the precise saving for an average household at £154 a year, made up of £88 from funding the RO through general taxation, £59 from not renewing ECO, and £7 of VAT savings¹. It has separately promised that the changes should see the average household save £150 a year¹.

Estimated annual savings vary by household type, according to figures published alongside the Budget¹:

The intervention lowers the policy costs that feed into the price cap, so households on price-capped variable tariffs stand to see a lower cap from April than would otherwise have been the case¹. The government has also said it expects energy companies to pass on equivalent savings to customers on fixed tariffs from April 2026, meaning providers should reduce rates accordingly from 1 April¹.

The energy price cap, which sets the maximum price per unit for customers on variable tariffs, is due to rise slightly by 0.2% from 1 January 2026¹. That equates to an annual bill of £1,758 for a typical household using 2,700kWh of electricity and 11,500kWh of gas a year, or £146.50 a month, from January to March 2026, compared with £1,755 (£146.25 a month) between October and December 2025¹. Forecaster Cornwall Insight is predicting a decrease in the April cap to £1,669, a reduction of £89, or 5%, on annual bills for a typical household compared with the January to March cap¹. That predicted cut is smaller than the £154 annual saving the government has estimated from its funding changes, which the report attributes to market dynamics and wholesale costs eating into the predicted savings¹.

Why it matters for households

The end of ECO funding removes a route through which suppliers funded energy-saving measures such as insulation for low-income and vulnerable households, with no replacement scheme reported¹. For billpayers, the change is a reduction in policy costs rather than a cash payment: the effect arrives through the April 2026 price cap for variable tariff customers, and through supplier rate reductions for those on fixed deals from 1 April¹. The size of the benefit depends on energy use, ranging from £88 a year for a low-demand flat to £442 for a high-use electric storage-heated household in the government's estimates¹. The £154 average figure is an estimate, and the actual outcome for April depends on wholesale costs and other factors that influence the cap, which is why the predicted cap fall is smaller than the estimated saving¹.

What happens next

ECO funding ends on 31 March 2026¹. Savings are expected to appear in bills from April 2026, with fixed-tariff customers expected to see equivalent reductions from 1 April¹. The April price cap level has not been confirmed; Cornwall Insight's £1,669 figure is a forecast¹. Further fluctuations in the cap are described as likely later in the year¹.