Policy Update: Warm Home Discount and Contracts for Difference

Policy
Publication date
Industry sector
Generation and Wholesale Market
Supply and Retail Market
Scheme name
WHD

Ofgem is clarifying the treatment of costs associated with the expanded Warm Home Discount (WHD) scheme and clarifying the Contracts for Difference (CfD) inputs in the energy price cap. 

Background

The WHD scheme provides a £150 annual rebate on energy bills to support low-income and vulnerable households. Following a government announcement in June 2025, the scheme will be expanded from October 2025 to more households experiencing fuel poverty. To do this, the “high-cost-to-heat” eligibility threshold will be removed which will allow all households in receipt of means-tested benefits to qualify for the rebate until the scheme’s scheduled end in March 2026. 

Expansion of the Warm Home Discount scheme

To reflect the increased cost of the expanded scheme, Ofgem proposes to update the WHD allowance in the energy price cap using the government’s latest estimate of total scheme costs.  

Although payments of the WHD will be made by suppliers to customers this coming winter, we propose this revised allowance will apply to the price cap from October to December 2025 and be recovered over a 12-month period (from October 2025 to September 2026).  

We are working with government to ensure the costs of this scheme are offset by other changes in the bill so they are neutral over time. 

If the WHD expansion is not implemented by government as planned, Ofgem proposes to revise the price cap inputs in November 2025 to reflect the original scheme design. 

Contracts for Difference

Separately, from October 2025, Ofgem will use a new dashboard published by the Low Carbon Contracts Company (LCCC) to source CfD inputs. This includes quarterly supplier payments, quarterly eligible demand, and the total eligible demand for the last full financial year.  

This change aims to improve transparency and provide earlier certainty and stability for suppliers. Furthermore, we will continue to engage with LCCC on any additional improvements regarding transparency. 

Get in touch

For further information on the topics discussed please contact:  RetailPriceRegulation@ofgem.gov.uk.