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Chancellor John Healey said the government will ask Ofgem to scrap standing charges on gas bills in 2027 or as soon as possible after. The charges are expected to be added to the price per unit of gas, so low-use households could pay less while high-use households could pay more. The precise start date and effects on different tariffs have not been confirmed.
Chancellor John Healey said the government will ask Ofgem to scrap standing charges on gas bills in 2027 or as soon as possible after, replacing the fixed daily fee with costs added to the unit price of gas. The change could reduce bills for households that use little gas, but estimates based on current rates suggest heavier users, including some larger families, may pay more.
Standing charges are fixed daily fees that customers pay for an energy connection regardless of how much gas they use. The source report puts the current average gas standing charge for direct-debit customers under the price cap at 29.68 pence a day, or about £108 a year. Healey’s announcement concerns gas charges; electricity standing charges are not included in the change announced so far.
The government estimates that 60 per cent of households could save an average of £45 a year after the reform. That is a government estimate, not a guaranteed saving for each household. The actual effect will depend on how much gas a household uses and the unit rate set after the standing charge is redistributed.
Comparison-site calculations cited in the report illustrate the possible split: a household using 7,000 kilowatt-hours of gas a year could be about £40 better off at current price-cap rates, while one using 14,000 kWh could be about £25 worse off. These are estimates based on current rates, not forecasts of bills in 2027. The report says expected implementation dates include October 1, 2027, or January 1, 2028, both dates associated with price-cap periods, but Healey did not confirm a specific start date.
How Gas Use Could Change Bills
The reform changes how a portion of gas network and supply costs is collected: instead of charging every connected customer the same daily fee, suppliers would recover those costs through the price paid for each unit of gas. That could help people who keep a gas connection but use little gas, including households that have moved to electric heating but retain a gas supply.
The trade-off is that higher-use households may contribute more under a higher unit rate. The cited examples suggest a difference between low and high users, but the final impact will depend on the rates Ofgem permits and the household’s consumption. People in larger or less energy-efficient homes could face higher costs, as could those who need to use more heating for health reasons. The reform’s distributional effect is therefore not uniform, even though the government expects most households to save.
The timing also limits its immediate effect: the change is not expected to apply before 2027, so it will not reduce bills in the near term. Its longer-term importance is whether shifting costs away from a fixed fee makes gas use and alternatives such as heat pumps compare differently for households.
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The Current Standing Charge System
Under the existing arrangement, standing charges apply even when a customer uses no gas. The payments are intended to cover network upgrades and other costs incurred by energy firms. The report gives an average direct-debit gas charge of 29.68p a day under the current price cap; it also reports a separate average electricity standing charge of 55.83p a day, about £200 a year. The electricity charge is not part of the gas reform announced.
The announcement came as part of a wider Budget package on energy costs. Healey also announced a £100 household energy payment this winter for eligible households in council tax bands A to D. He said around 20 million households would receive it and that the scheme would cost £2.6 billion. The report also says a VAT cut on electricity bills was extended to July 2027. These are separate measures from the proposed gas standing-charge reform.
The government’s stated timetable is 2027 or as soon as possible after. The source report describes October 2027 and January 2028 as possible dates linked to new price-cap periods, but those dates are not a confirmed implementation schedule.
“The change will give families “breathing space” and make the energy system fairer.”
— John Healey, Chancellor
Rates and Household Effects Remain Open
Ofgem has not yet published the detailed arrangements for removing the charge, and the announcement does not set a firm start date. It is also not yet clear exactly how much will be added to the unit rate, how the approach will interact with future price-cap levels, or whether the change will apply in the same way to customers on fixed-rate tariffs.
The figures cited for household savings and losses use current price-cap rates to illustrate possible outcomes. They cannot establish what any customer will pay in 2027, when energy prices, usage and tariff terms may differ. The source report says experts at GoCompare raised questions about fixed-rate customers and whether the changes will be temporary or permanent; those points remain unresolved in the announcement.
It is also uncertain how the final design will affect households whose high gas use is linked to poor insulation, family size or medical needs. Those groups could face increased costs if more of the charge is collected per unit, even as low-use customers benefit.
Ofgem Must Set the Implementation
The government has said it will ask Ofgem to remove gas standing charges in 2027 or as soon as possible after. The regulator’s detailed decisions will determine the timetable and how the costs are reflected in gas unit rates. October 1, 2027, and January 1, 2028, have been identified in the report as possible price-cap change dates, but neither has been confirmed as the start date.
Households will need to wait for the regulatory detail and revised tariff information before estimating their own bills. The separate £100 winter payment is due to go to eligible households in council tax bands A to D, according to the Budget announcement; the gas standing-charge reform is a later change and should not be treated as support available this winter.
Key Questions
What is the government proposing to scrap?
The proposal is to remove the fixed daily standing charge on gas bills. The government says it will ask Ofgem to make the change in 2027 or as soon as possible after.
Will electricity standing charges also be removed?
Not under the announcement described here. Healey said changes to electricity standing charges would be announced in due course. The current proposal covers gas.
Who could save money, and who could pay more?
Low-use households could benefit because the fixed daily fee would no longer apply regardless of consumption. Higher-use households, including some larger families or homes with poor insulation, could pay more if costs are shifted into the unit rate. The precise effect is not yet known.
When will the change take effect?
The announced timetable is 2027 or as soon as possible after. October 2027 and January 2028 have been mentioned as possible dates, but no specific start date has been confirmed.
Are the estimated savings guaranteed?
No. The government’s estimate of an average £45 annual saving for 60 per cent of households, and the household examples based on current rates, are estimates. Individual results will depend on future unit rates, gas use and tariff terms.
Source: rss
