The Treasury has confirmed plans to remove fixed daily charges from household gas bills, a move expected to save around 60 per cent of households an average of £45 a year on their annual gas bills.
The changes will apply to approximately 23 million homes from 2027, or as soon as possible afterwards, and will be implemented by energy regulator Ofgem at the request of Chancellor John Healey. The fixed daily charges currently cost a typical household around £108 a year.
Costs Shift to Unit Rates
While the standing charges will be removed, the costs they cover will not disappear. Instead, they will be transferred to the unit rate customers pay for the gas they use. This means households with lower gas consumption could benefit most, while those using larger amounts may see smaller savings or potentially face higher costs.
Prime Minister Andy Burnham said: "Abolishing gas standing charges is about basic fairness and giving people more control over their bills. I am determined to reform our broken energy market, so it better serves the public interest."
Mr Healey added: "Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space. My Budget will draw a line in the sand on an energy policy that has failed British billpayers for years, letting extra costs on bills pile high and leaving households even more exposed to global shocks."
What Are Gas Standing Charges?
Standing charges are fixed daily fees included in energy bills, regardless of how much gas or electricity a household uses. They help cover the costs of supplying energy to properties, including maintaining the networks and infrastructure needed to deliver gas and electricity.
Unlike unit rates, which are based on the amount of energy consumed, standing charges are payable even when no gas is being used. This means customers can continue accumulating charges during warmer months when their central heating is switched off, or when they are away from home.
Under the Treasury's proposals, the fixed daily charge for gas would be removed and the costs recovered through the price charged for each unit of gas consumed. The changes announced so far relate specifically to gas standing charges, with no equivalent announcement about removing electricity standing charges.
Impact on Bills from 2027
The Treasury estimates that six in 10 households could save an average of £45 annually, although the actual impact will depend on individual gas consumption. Households that use relatively little gas could see the greatest benefit because they would no longer pay the same fixed daily charge as properties with much higher usage.
However, because the unit price of gas would increase to cover the costs previously collected through standing charges, households using more gas could end up paying more. The Government has not yet confirmed how the new unit rates would be calculated or exactly when the changes would take effect.
The Treasury said the Chancellor will ask Ofgem to remove gas standing charges "in 2027 or as soon as possible after", meaning the changes are not guaranteed to begin at the start of next year. For now, households will continue paying their existing standing charges until the new arrangements are introduced. Further details are expected following the Chancellor's Budget statement on Wednesday.
