Energy bill savings due to scrapping of ECO and 75% reduction in RO cost

Hi ​@Ren100

Thanks for kicking off what should be an interesting discussion. Martin Lewis had this to say last December and it had been recently updated. 

https://www.moneysavingexpert.com/news/2025/12/octopus-energy-autumn-budget-savings-fixes/

​@Firedog had a good point about this where he said (I hope I've got this right) that if Fixed Price contracts are no longer fixed then where does that leave us because they protect us against increases in the Cap.

The ECO and RO costs aren't going away. They are going onto general taxation which is just a way of hiding what would otherwise have been a significant rise in the Cap due to energy system upgrades needed, amongst other things, power links from Scotland to England to avoid paying curtailment charges on Scottish windfarms. In other words they built the windfarms before they built the power links to bring it to where it could be used.

Peter

Hi ​@Peter E 

Many thanks for your response.

I guess you could argue that the fixed price tartiff is not impacted by energy cost fluctations which will of course always occur. But where government interventions like this happen and they confirm there is an expectation that it should apply to all energy consumers including those on fixed rates. it has to apply equally to all consumers. Given the existing government’s liking for hiking and introducing new taxes, if they introduced a brand new tax for example which resulted in energy companies having to pass it onto their customers and a government expectation for them to do so, I would expect it to apply to all custiomers including those on a fixed rate. 

If this one is not applied across the board, then those on fixed rates end up paying the tax both on their energy bills and through general taxation.

I await Ovo official confirmation of how they intend to implement this over the next few weeks.

Thanks again

Ren 

I can’t remember what I wrote. It’s not just changes in the price cap, though. Suppliers are liable for all sorts of costs, and these vary because of all sorts of changes made by those levying them - the Treasury, Ofgem, power generators, transmission and distribution network operators and possibly others. The changes referred to here are the ones presaged in November’s budget, which reduce suppliers’ ‘policy’ costs by an amount that averages ~£154 per household. This will be taken into account in the 2nd quarter cap, to be revealed next week - nice for those on standard variable tariffs. 

Somebody then cried foul, and demanded that all customers - not just those on capped tariffs - should benefit from the treasury’s generosity, including therefore all those on fixed-rate tariffs. I will have drawn attention to the fact that if government-mandated reductions in their demands on suppliers can be applied to those who thought their tariff rates were fixed, there is nothing to stop the opposite from happening. Increases in mandatory costs could with impunity also be imposed on those who thought their tariff rates were fixed - couldn’t they? If that other ‘policy cost’ - VAT - rises or falls, the cost of all energy tariffs does too, so there is a precedent.

Ah yes, the old favourite notional “average household” consumption figure again! Of course the more kWh a household buys, then the more one will “save”, at a (probable) approximate rate of  3.5p per electricity kWh and 0.35p per gas kWh.  Over a year of normal usage in my particular household, for example, this might seem to offer an “apparent” saving of £12 + £1.50 + around 0.70p in VAT savings. 

“Apparent” because, as has been said, not only has general taxation got to recover such savings, but in addition the increased price cap to come will, as Martin Lewis says, affect “the pound in one’s pocket” (I’m old enough actually to remember Harry using that picturesque expression!) associated with the apparent savings…even for those of us on fixed tariffs such tariffs ultimately offer only a short horizon, even without any possibly prescient precedents (can I say “prescient precedents”?!) alluded to by ​@Firedog