Energy bill overhaul could hit taxpayers with hidden costs

The energy bill overhaul proposed by Whitehall officials could add £80 to £120 a year to a typical three-bedroom semi-detached home’s energy costs, and that is before any rise in wholesale prices. The Telegraph has reported that the plan, still under consultation, would transfer the cost of upgrading Britain’s electricity grid from energy suppliers to general taxation, meaning every taxpayer, not just heavy users, would foot the bill.

As reported by The Telegraph, the Department for Energy Security and Net Zero is exploring a model where network upgrade costs, currently added to household bills via standing charges, are instead paid through income tax or VAT. The shift aims to protect low-income households from rising standing charges, but critics argue it masks the true cost of net zero and could disincentivise energy efficiency.

Who pays, and who benefits

Ofgem data shows the average standing charge for electricity is now 60p a day, up from 45p in 2021. Under the proposed overhaul, that charge could fall to 40p, but income tax would rise by roughly 0.3p in the pound for basic-rate taxpayers. The net effect: a household earning £30,000 might save £15 a year on standing charges but pay £45 more in tax, a net loss of £30.

The catch is that households who use very little energy, pensioners in small flats, for example, would see their bills fall, while families in larger homes with electric heating would face higher costs. The Energy Saving Trust notes that such a shift could reduce the incentive to install solar panels or heat pumps, because the upfront cost of grid upgrades would no longer be visible on the bill.

What it means for EPC ratings and grants

Homeowners targeting an EPC rating of C or above, required by 2030 for new tenancies in England and Wales, should watch closely. If network costs move to tax, the Boiler Upgrade Scheme (BUS) and Great British Insulation Scheme (GBIS) may be reprioritised. The BUS currently offers £7,500 off a heat pump installation, but Treasury officials have signalled that grants could be cut if the tax burden rises.

The Great British Insulation Scheme closed on 31 March 2026. It funded insulation measures only and never covered windows or glazing. If the overhaul proceeds, that underspend could be redirected to cover the tax shortfall, slowing the rollout of free insulation for low-income homes.

What homeowners should do now

The consultation runs until 31 October 2025. Until then, the current rules apply. Households on standard variable tariffs can lock in fixed deals now, the average fixed tariff is 26p/kWh, compared to 28p/kWh on the price cap. For those planning eco-upgrades, the window to secure BUS grants closes when the Treasury finalises the overhaul, likely in spring 2026.

Check your EPC rating on the government’s register. If it is below C, consider loft insulation (costs £300-£500, saves £180-£225 a year) or a heat pump (costs £7,500-£14,000 after BUS grant, saves up to £400 a year). Act before the policy shifts, because once the costs move to tax, the incentive to invest in your home’s efficiency may shrink.