How will energy bills be reduced by 150

Energy bills remain one of the biggest household expenses in the UK. The government has announced that a typical household could see a £150 reduction in annual energy bills during 2026. This figure is the headline saving for a typical dual-fuel household paying by direct debit, as modelled by the Department for Energy Security and Net Zero (DESNZ) in its 2026 impact assessment (DESNZ, 2026).

The £150 saving is not a single government payment. It is the cumulative effect of several policy and market changes taking effect in 2026. The actual saving for your home will vary depending on your property size, insulation level, heating system, and tariff type.

The average UK household could see a £150 reduction in annual energy bills under the 2026 policy package

The £150 figure is an average calculated by DESNZ for a typical dual-fuel household using around 12,000 kWh of gas and 2,900 kWh of electricity per year, paying by direct debit. The saving is not a lump sum paid into your bank account. Instead, it appears as lower unit rates on your bills from January 2026.

Your actual saving may be higher or lower. A larger home with poor insulation will see a smaller percentage reduction, while a smaller, well-insulated flat may see a larger one. The saving is also affected by your tariff type and whether you use prepayment meters, which have different cap levels.

The main driver of the £150 saving is the new Energy Price Guarantee level for 2026

Ofgem’s price cap for the first quarter of 2026 was set at £1,736 for typical use (Ofgem, 2026). However, the government’s Energy Price Guarantee (EPG) caps the unit rate that suppliers can charge, bringing the typical bill down to an estimated £1,586 (GOV.UK, 2026).

The difference between the Ofgem cap and the EPG level accounts for roughly £150 of the annual saving for an average household. The EPG is funded through general taxation, not through levies on bills. It is separate from the standing charge, which remains at the Ofgem-capped level and covers network costs and supplier overheads.

Quick numbers Key figures behind the £150 bill reduction

Upgrading loft and cavity wall insulation can add a further £200-£300 to the £150 saving

The Energy Company Obligation (ECO4) scheme, running until March 2026, provides grants for insulation to low-income and vulnerable households (GOV.UK, 2026). All homeowners can access reduced-cost insulation through their supplier under the scheme, even if they do not qualify for a full grant.

Topping up loft insulation from 100mm to the recommended 270mm can save £150–£200 per year, according to the Energy Saving Trust (Energy Saving Trust, 2026). Filling cavity walls in an uninsulated semi-detached house saves £130–£200 annually. Combined, these upgrades could reduce a typical bill by £280–£400, on top of the £150 EPG saving.

Insulation work under ECO4 must be carried out by a TrustMark-registered installer to ensure quality and eligibility (TrustMark, 2026).

Replacing an old gas boiler with a heat pump under the Boiler Upgrade Scheme saves £100-£200 annually

The Boiler Upgrade Scheme (BUS) offers a £7,500 grant toward an air-source heat pump as of 2026 (DESNZ, 2026). This reduces the upfront cost significantly. A typical heat pump in a well-insulated 3-bed semi saves £100–£200 per year compared to a gas boiler running at current fuel prices, according to DESNZ modelling.

The £150 EPG saving plus a £150 heat pump saving would total £300 off the annual bill. Heat pump installations must be done by an MCS-certified installer to qualify for the BUS grant (MCS, 2026). Gas boiler replacements must be completed by a Gas Safe Register engineer (Gas Safe Register, 2026).

Learn more about the Boiler Upgrade Scheme eligibility criteria

Smart time-of-use tariffs can cut another £50-£100 from the annual bill

Smart meters enable time-of-use tariffs, such as Economy 7 or Agile Octopus, where electricity is cheaper overnight. A typical household that shifts 30% of its electricity use to off-peak hours saves £50–£100 per year, according to Ofgem data (Ofgem, 2026).

Combined with the £150 EPG saving, a household on a smart tariff could see a total reduction of £200–£250. To benefit, you need a smart meter and a tariff that rewards off-peak usage. Your supplier can tell you which time-of-use tariffs are available in your area.

Find out how to get a smart meter installed

To receive grants or verify an installer, check MCS, TrustMark, and Gas Safe Register

Heat pump installations must be done by an MCS-certified installer to qualify for the Boiler Upgrade Scheme grant. You can check the register at mcscertified.com.

Insulation work under ECO4 must be carried out by a TrustMark-registered installer. Verify at trustmark.org.uk.

Gas boiler replacements must be completed by a Gas Safe Register engineer. Check at gassaferegister.co.uk. Any unregistered work voids warranties and may be unsafe.

Always check the installer’s certification before hiring. This protects your investment and ensures you qualify for any government grants.

The £150 saving is the direct result of the 2026 Energy Price Guarantee, not a single payment or bonus

The £150 is the difference between the Ofgem price cap and the government-subsidised EPG rate for typical usage. It is not a lump sum paid to households. It appears as lower unit rates on bills from January 2026 (GOV.UK, 2026).

The saving is guaranteed for the duration of the EPG, currently set through to the end of 2026. For the most accurate personal saving, use the Ofgem online calculator with your own annual kWh usage (Ofgem, 2026).

See how the Energy Price Guarantee compares to the price cap