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Chancellor John Healey said the government will ask energy regulator Ofgem to remove standing charges from gas bills in 2027 or as soon as possible after. The cost is expected to move into the per-unit gas rate, so households using little gas may pay less while high-use homes could pay more. Electricity standing charges are not part of this change.
Chancellor John Healey said the government will ask Ofgem to remove standing charges from household gas bills in 2027 or as soon as possible after, shifting the fixed daily cost into the price households pay for each unit of gas. The change could lower costs for households that use little gas, but higher-use homes may pay more; electricity standing charges are not included in the announcement.
A standing charge is a fixed daily fee added to an energy bill regardless of how much gas a customer uses. Under current price-cap rates for customers paying by direct debit, the average gas standing charge is 29.68 pence a day, or about £108 a year. The corresponding electricity charge averages 55.83 pence a day, about £200 a year, and is not being removed under this gas proposal.
The government estimates that 60% of households could save an average of £45 a year after the gas charge is removed. Those are projected savings, not a guaranteed amount for every customer. With the fixed charge added to the unit rate, the gas price per kilowatt-hour would rise to recover those costs through consumption instead.
The announcement sets a broad timetable rather than a start date. Healey said he would ask Ofgem to make the change in 2027 or as soon as possible after. The report says possible implementation dates include October 1, 2027, or January 1, 2028, when a new price-cap period begins, but the exact date has not been confirmed.
How the Cost Shift Changes Bills
The reform changes how gas-system costs are collected, rather than removing those costs altogether. Customers currently pay the standing charge whether or not they use gas; under the planned approach, more of the cost would be recovered through the unit rate. That makes the amount of gas used more important to the final bill.
For people who use little gas—such as residents of smaller homes or households that have switched to electric heating but kept a gas connection—the change could reduce payments. Uswitch estimated that a household using 7,000 kilowatt-hours a year could be around £40 better off based on current rates. That is an illustrative estimate, not a forecast of a future bill.
The reverse may apply to larger families and homes with high gas use. Uswitch said a home using 14,000 kilowatt-hours a year, Ofgem’s high-user benchmark, could be about £25 worse off using current price-cap rates. Actual outcomes will depend on the future unit rate, consumption, tariff and how Ofgem implements the change. The change may also affect the relative running costs of gas heating and electric alternatives, although it does not itself provide funding to switch heating systems.
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Current Charges and Budget Measures
The gas proposal was announced alongside other Budget measures related to household energy costs. According to the report, Healey said a £100 energy payment would be sent directly to bank accounts this winter for households in council tax bands A to D. He said the scheme would cost £2.6 billion and reach about 20 million households. This payment is separate from the planned change to gas charges.
The Budget also extended a VAT cut on electricity bills to July 2027. Healey said reform of electricity standing charges would be announced later, but provided no detail on what that reform might involve. The gas announcement therefore does not mean all energy standing charges are being removed: the electricity fee remains in place for now.
Standing charges are intended to cover costs such as maintaining and upgrading energy networks and other expenses incurred by suppliers. The current gas charge has remained fairly steady in recent years, according to the source report, while electricity standing charges have risen over the past decade. The announced policy would redistribute gas-related costs between customers according to use; it does not establish that those underlying costs will disappear.
“The change will give families “breathing space” and make the energy system fairer.”
— John Healey, Chancellor
Dates, Tariffs and Household Outcomes
The final implementation date and detailed rules have not been confirmed. The government has said 2027 or as soon as possible after, while the specific dates cited in the report are expectations rather than a settled timetable. Ofgem’s role in setting the arrangements will be central to how and when bills change.
It is also not clear how the new pricing structure would apply to customers on fixed-rate tariffs, or how long the change would remain in place. The government has not announced a corresponding decision on electricity standing charges. Household savings or additional costs will depend on usage and the eventual unit rate; estimates based on current price-cap rates may not match future bills.
Some high-use households may face higher costs, including people in poorly insulated homes, larger families and people who need to keep heating on for health reasons, according to Cornwall Insight. The source material does not set out a specific safeguard or compensation arrangement for those customers.
Ofgem Sets Out the Practical Changes
The next major step is for the government to ask Ofgem to implement the gas-charge reform and set out the detailed approach. Customers will need clarity on the start date, how existing tariffs are treated and the size of the revised unit rate before they can judge the effect on their own bills.
Until those details are published, households should not assume that the projected £45 average saving will apply to them or that bills will fall overall. The change is not expected to reduce costs for the coming winter, and other factors—including energy use, tariff terms and future price-cap rates—will continue to affect bills. Any later announcement on electricity standing charges would be a separate policy development.
Key Questions
When will gas standing charges be removed?
The government says it will ask Ofgem to make the change in 2027 or as soon as possible after. October 1, 2027, and January 1, 2028, have been cited as possible dates, but no final date has been confirmed.
Will removing the charge make gas free when I do not use it?
No. The plan is to move the standing-charge cost into the unit rate for gas. Customers would still pay for the gas they use, and the per-unit price is expected to reflect more of the relevant costs.
Who is most likely to save?
Households with low gas use may benefit because they would no longer pay the same fixed daily fee regardless of consumption. The government estimates that 60% of households could save an average of £45 a year, but individual results are not guaranteed.
Could some households pay more?
Yes. High-use households, including larger families and homes that need more heating, could pay more when costs are collected through a higher unit rate. Estimates based on current rates suggest a household using 14,000 kilowatt-hours annually could be around £25 worse off, but future bills will depend on the final rules and rates.
Are electricity standing charges being removed too?
Not under this announcement. Electricity standing charges remain in place. Healey said the government would announce electricity-charge reforms in due course, without giving details in the source report.
Source: thisismoney.co.uk
