The Treasury has announced that standing charges on gas bills will be scrapped from next year for around 23 million homes, a change that Octopus Energy chief executive Greg Jackson says will leave the 'vast majority' of families better off.
What the change means for bills
Standing charges are a fixed daily fee added to bills regardless of how much gas a customer uses, costing around £108 per year for a typical household. Appearing on BBC Breakfast, Mr Jackson said: "In fact, the vast majority of families will be better off. There's a few sort of typically very large homes that use a lot of gas and they'll end up paying a bit more."
He added: "But for the vast majority of people, they'll pay less. In fact, I think it'll be about £45 pounds a year less on average. So on top of the removal of VAT from electricity that was another £50 and then removing some of the taxes that was £100. So the government's taken a lot of bills."
BBC Breakfast presenter Jon Kay noted that the government has said three fifths of households will be better off, meaning "a lot of people watching right now particularly maybe busy households h lots of kids lots of gas used they're potentially significantly worse off under this."
Reduced gas consumption
Mr Jackson responded: "So what we've seen is a 17% reduction in gas consumption in the last year or two. That's an official figure. And what that means is people are using less gas regardless of household size."
He said people have "taken more control of their thermostats" and dealt with the flow temperature on their boiler, adding: "This means that those families and even those who use a lot of gas. But, you know, if you turn off a radiator in a room you don't use, you'll get more benefit now. And I think that's a good thing."
Chancellor's Budget plans
Chancellor John Healey will confirm the change in his first Budget on Wednesday, in which he has promised "breathing space" for households and businesses. He said: "Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space."
He added: "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."
The fee does not pay for the energy itself but covers the cost of delivering gas and electricity to homes and businesses, including essential maintenance and infrastructure upgrades. Concerns have been raised that some low-income consumers who use large amounts of energy could be left worse off if costs move to the unit rate part of the gas bill.
The Treasury said ministers will "set out in due course targeted mitigation for a small number of households," and that those "not seeing an automatic saving will still have better control over their bills without the worry of affording the standing charge."
Mr Healey will also announce plans to axe green levies from energy bills and put them onto general taxation, The Times reported. In a video message ahead of the autumn statement, he said: "This Budget is designed to give households breathing space from some of the everyday costs, provide targeted support for businesses and self-employed people, and to start the long-term action needed to get energy costs down for good."
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said removing gas standing charges would "bring real relief to many low-income households who use very little energy and for prepayment customers it could stop debt building up in the summer months." He also said moving levies off electricity bills into general taxation would be "a positive step," but added: "Despite the positives of the gas standing charges proposal, millions of households won't see a saving. This means ministers have serious questions to answer about who they are and, if they are vulnerable or on low incomes but have high energy needs, how they will be protected."
Household energy bills rose in October with a 4% hike to Ofgem's energy price cap, and Cornwall Insight forecasts the cap will rise by a further 16% to £1,999 a year on January 1, up by £276 on the October-December level. The Government has temporarily removed the 5% VAT from electricity bills until March 31 next year to cut around £45 a year, while households still pay 5% VAT for gas.
