Prime Minister Andy Burnham has instructed Chancellor John Healey and Energy Secretary Miatta Fahnbulleh to examine the feasibility of removing standing charges from gas bills, with a report expected to Parliament at the earliest opportunity. Standing charges are fixed daily fees that households must pay to maintain connection to the energy supply, with costs varying by region. These charges currently average 29.7p per day for gas and cover expenses related to transporting energy through pipes and wires, infrastructure maintenance, and support schemes for low-income households.
The proposal has generated mixed responses from stakeholders. Research foundation Nesta has indicated that eliminating gas standing charges would represent a progressive policy change, potentially reducing typical annual bills by £27 and providing particular assistance to low-income households. However, Energy UK, the industry body representing energy suppliers, stated that the actual impact on bills would depend on how costs are reallocated within billing structures. The research firm has suggested that standing charges could be incorporated into the unit rate, meaning consumers would pay only for energy they use.
This approach would likely benefit households with minimal gas consumption but could result in higher costs for heavy users. Citizens Advice has raised concerns about potential negative consequences for vulnerable customers, particularly those with low incomes but high energy usage, who could face increased bills under such reforms. Regulator Ofgem has conducted consultations on standing charges for nearly two years and is currently running a pilot scheme on low standing charge tariffs, though no firm conclusions have been reached.
Burnham’s statement during Prime Minister’s Questions linked the proposal to the government’s broader energy strategy, noting that approval for the Jackdaw gas field development in the North Sea would enable increased investment in renewable energy sources. He indicated that expanding renewable capacity would substantially reduce household bills by severing the connection between gas and electricity prices. Energy prices in the United Kingdom are predominantly determined by gas prices, a factor frequently cited as contributing to relatively high electricity costs compared to other nations.
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