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Prime Minister Andy Burnham has called on government ministers to devise a strategy aimed at eliminating standing charges from gas bills. These standing charges are fixed daily fees that cover the costs related to maintaining connections to the gas supply network. Importantly, these fees differ depending on the region and are payable by households regardless of whether any energy is actually consumed.
Energy UK, an industry organization, stated that the impact of such a change on energy bills would largely depend on how and where these charges are reallocated within the billing structure. Meanwhile, a prominent research organization argued that removing standing charges would be a progressive reform benefiting low-income households by reducing the typical annual gas bill by about £27. During Prime Minister’s Questions, Burnham highlighted the government’s decision to approve the Jackdaw gas field in the North Sea as a practical measure that would allow increased investment in renewable energy and provide greater support for consumers facing high energy costs.
Burnham revealed that he had tasked Chancellor John Healey and Energy Secretary Miatta Fahnbulleh with exploring the possibility of removing gas standing charges and presenting their findings to Parliament as soon as possible. Although no specific mechanism has yet been proposed, the research group Nesta has suggested shifting these fixed costs into the per-unit charge for gas consumption so that users pay proportionally to their energy usage. This change would likely advantage customers with low gas consumption, though it might increase costs for heavier users.
For nearly two years, the energy regulator Ofgem has been consulting on the issue of standing charges, receiving substantial public feedback, including strong opposition from those with low energy usage who are unable to reduce these fees. Ofgem is currently testing pilot schemes with lower standing charges, but it has not reached definitive conclusions, indicating the complexity of the issue. Currently, average standing charges stand at 54.8p per day for electricity and 29.7p per day for gas. When questioned about why similar reforms have not been proposed for electricity standing charges, an official spokesperson noted that VAT on electricity bills has already been reduced.
Standing charges cover expenses such as transporting energy to consumers via infrastructure and maintaining that infrastructure, in addition to funding support programs for low-income households. Citizens Advice has cautioned that reforms could negatively affect vulnerable customers, particularly those on low incomes but with high energy usage. Madeleine Gabriel, director of sustainable future at Nesta, supported the removal of gas standing charges, stating that “Abolishing the gas standing charge and moving those costs onto the unit rate would help those worst hit by rising energy prices.”
Looking ahead, there is ongoing pressure on the Chancellor to introduce more targeted energy relief measures in the upcoming Budget, especially given forecasts predicting a 16% rise in energy prices starting in January, reaching a four-year peak. Beyond standing charges, Burnham emphasized that investing in renewable energy could significantly reduce household energy bills by decoupling electricity prices from gas prices during the current parliamentary term. In the UK, electricity prices are largely driven by gas prices, a factor often cited as the reason why electricity tends to be more expensive in the country compared to many others
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