Policy costs are government levies collected to fund environmental and social programs. They make up 16% of an electricity bill and around 6% of a gas bill.

They fall into two categories:

1. Environmental levies cover investments in renewable energy. They currently fund three schemes:
   1. The Renewables Obligation covers previous investments made by electricity companies in renewable electricity generation.
   2. The Feed-in Tariff scheme covers incentives paid to households that installed solar panels and other green technology early on.
   3. The Green Gas Levy funds the production of biomethane as a “green” component of the gas supply.
2. Social levies fund government schemes for fuel-poor households.
   1. The Energy Company Obligation scheme instals energy efficiency improvements for low-income households.
   2. Warm Homes Discount provides low-income households with annual discounts on their energy bill.
   3. Assistance for Areas with High Electricity Distribution Costs is a small levy subsidising network costs in remote parts of northern Scotland.

The majority of these policy costs are on electricity bills. In recent years, Nesta and many others have suggested that a larger portion of levies should be recovered through gas bills instead, to incentivise the transition away from fossil fuels to electrical heat.