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Chancellor John Healey says the government will ask Ofgem to remove standing charges from gas bills in 2027 or as soon as possible after. The fixed daily charge is expected to be added to the price per unit of gas, which could help low-use households but leave some larger or high-use homes paying more.
Chancellor John Healey has said the government will ask energy regulator Ofgem to remove standing charges from gas bills in 2027 or as soon as possible after, shifting those costs into the rate customers pay for each unit of gas. The change could reduce bills for households that use little gas, but people in larger or higher-use homes may pay more.
Standing charges are fixed daily fees that customers pay whether or not they use gas. Under the current price cap, the average gas standing charge for a household paying by direct debit is 29.68 pence a day, or about £108 over a year, according to the report. The charge contributes to network and other costs faced by energy suppliers.
After the change, the costs currently covered by the gas standing charge would be reflected in the unit rate — the price for each kilowatt-hour (kWh) of gas used. The government estimates that 60 per cent of households will save an average of £45 a year. That is an estimate, not a guaranteed saving for every household, and the actual effect will depend on gas use and the rates set under the revised arrangements.
The report says standing charges on electricity bills will remain for now. Healey said he would announce electricity standing-charge reform in due course. Separately, the Budget included an extension of a VAT cut on electricity bills to July 2027 and a £100 winter energy payment for eligible households in council tax bands A to D, which the government said would reach about 20 million households.
How Gas Use Will Shape Savings
The change alters how a fixed part of gas costs is allocated across customers. Households that use relatively little gas currently pay the daily charge regardless of consumption; under a unit-rate model, their contribution to those costs would be tied more directly to how much gas they use. That could benefit people in smaller homes, customers who use little gas, and households that retain a gas connection but rely on electric heating.
But the shift does not remove the underlying costs from the system. If they are recovered through a higher per-unit rate, households using more gas may pay more. That includes some larger families and homes with poor insulation, as well as people who need to maintain warmer homes for health reasons. The redistribution matters because the policy is intended to help household budgets, while the eventual outcome will vary according to consumption and tariff details.
The announcement also arrives against a near-term bills timetable: the report says the change will not take effect in time for the January price-cap period. It is therefore a planned reform for a later date, not immediate relief from current bills. Its effects will depend on Ofgem’s implementation and on the rates that apply when the change begins.
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What the Current Charges Cover
Energy bills include both charges linked to consumption and fixed charges. The gas standing charge applies each day even when a customer uses no gas; the unit rate applies to each kWh consumed. Under current direct-debit price-cap rates cited in the report, the average standing charge is 29.68p a day for gas. Electricity standing charges are separate and average 55.83p a day under the same cited rates.
The planned reform concerns only the gas standing charge described in Healey’s announcement. The report says the government expects the change to take effect at a price-cap reset, with October 1, 2027, or January 1, 2028 identified as possible dates. Those dates are presented as expectations, not a confirmed start date. The government’s stated commitment is to ask Ofgem to make the change in 2027 or as soon as possible after.
The Budget also included other energy-bill measures, but they are distinct from the standing-charge reform. The £100 winter payment is for households in council tax bands A to D, while the VAT cut on electricity bills was extended to July 2027, according to the report. Those measures should not be read as part of the gas tariff change.
“The change will give families “breathing space” and make the energy system fairer.”
— John Healey, Chancellor
Tariff Details Still Await Ofgem
The government has announced its intention to ask Ofgem to remove the charge, but the report does not provide final tariff rates or a confirmed start date. It is also not clear exactly how the regulator will calculate the revised unit rate or how costs will be distributed among different customer groups.
The eventual effect on individual bills remains uncertain. The government’s estimate that 60 per cent of households would save an average of £45 a year is a broad projection; it does not mean every household in that group will save that amount. Uswitch’s estimates cited in the report suggest a household using 7,000 kWh a year could be around £40 better off at current rates, while one using 14,000 kWh a year could be around £25 worse off. Those figures are examples based on current price-cap rates, not forecasts of future bills.
The report also says it is not yet known whether the change will apply to customers on fixed-rate tariffs, or whether the arrangements will be temporary or permanent. Electricity standing-charge reform remains a separate matter, with no specific plan or timetable given in the source report.
Ofgem Sets the Implementation Path
The next step is for the government to ask Ofgem to remove gas standing charges. The regulator’s arrangements will determine the detailed tariff structure and when suppliers apply it. The government has put the target at 2027 or as soon as possible after, while the report identifies October 2027 and January 2028 as possible price-cap change dates.
Households will need the final unit rates and implementation rules to understand the effect on their own bills. Until those details are published, the savings and extra costs cited for different usage levels should be treated as illustrations based on current rates. The announced change is not expected to affect bills before the planned implementation period, so customers should not assume it will reduce charges this winter.
Key Questions
When will gas standing charges be removed?
Healey said the government will ask Ofgem to remove them in 2027 or as soon as possible after. The report identifies October 1, 2027, or January 1, 2028, as possible dates, but neither is confirmed as the start date.
Will every household save money?
No. The government estimates that 60 per cent of households will save an average of £45 a year, but the outcome will depend on gas use and final tariff rates. Higher-use households could pay more if costs move into the unit rate.
How will the charge appear on gas bills after the change?
The fixed daily charge is expected to be added to the price per kWh of gas. Customers would then contribute to those costs through the amount of gas they use rather than paying the same standing charge each day.
Are electricity standing charges being scrapped too?
Not under the announced gas measure. Healey said electricity standing-charge reform would be announced in due course, and the report says the existing electricity charge will remain unchanged for now.
Will the change lower bills this winter?
The report says the reform will not take effect in time for the January price-cap period. It is therefore not expected to provide relief on bills this winter.
Source: thisismoney.co.uk
