Chancellor John Healey has confirmed he will axe standing charges on gas bills, in a move that will benefit millions of households – but experts warn those in larger homes could be worse off.
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those → confirm → homes
The Treasury said Healey will today ask the energy regulator Ofgem to remove standing charges 'in 2027 or as soon as possible after'.
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Healey → say → 2027
Healey said the change will give families 'breathing space' and make the energy system fairer.
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system → say → space
He said reform on standing charges imposed on electricity bills would be announced in due course.
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reform → say → course
This is Money examines what standing charges are, how much they cost households and how the scrapping of them on gas bills will affect you.
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scrapping → examine → you
Standing charges are daily fixed charges added to energy bills that people must pay irrespective of how much energy they use.
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they → fix → energy
Even if no energy is used, the standing charge will still apply.
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charge → use → ?
The money from standing charges is meant to be used to cover network upgrades and other additional costs energy firms incur.
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firms → mean → upgrades
Under the current energy price cap, average standing charges for bills paid via direct debit are 55.83p per day for electricity and 29.68p per day for gas.
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charges → pay → gas
It means it costs households around £200 a year for electricity and approximately £108 a year for gas.
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it → mean → gas
While the electricity standing charge has rocketed in the past decade, gas standing charges – those Healey is targeting – have remained fairly steady.
Axed:
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Healey → rocket → decade
John Healey has confirmed that standing charges on gas bills are being scrapped
What has Healey announced?
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Healey → confirm → What
Healey has confirmed he will scrap gas standing charges in the Budget today, as households battle even higher energy bills – but changes will not bite in time for January, when the Ofgem set price cap is set to soar.
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cap → confirm → January
The decision to scrap standing charges on gas bills will affect tens of millions of people.
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decision → scrap → people
Households will see the cost of the standing charge added to the unit rate instead, which is the price paid for every kilowatt hour (kWh) of gas used.
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which → see → gas
The Government estimates 60 per cent of households will save an average of £45 per year once standing charges on gas bills are scrapped.
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charges → estimate → bills
The axeing of standing charges on gas bills will take place by 2027 at the earliest, the Chancellor said.
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Chancellor → take → earliest
It is expected that the standing charges on gas bills will be scrapped on either October 1, 2027, or January 1, 2028.
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charges → expect → October
Both of these dates will be when a new energy price cap is announced.
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cap → announce → dates
Pricier standing charges on electricity bills will remain unchanged.
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charges → remain → bills
We do not yet know how long the changes will remain in place, whether they will be temporary or permanent, or what the implications could be for customers on fixed-rate tariffs, experts at GoCompare said.
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experts → know → GoCompare
How will household gas bills be affected?
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bills → affect → ?
Households using only a small amount of gas or people living in smaller homes should be better off once standing charges on gas bills are scrapped.
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charges → use → bills
Richard Neudegg, director of regulation at Uswitch.com, said: 'Moving gas standing charges onto the unit rate is a sensible idea for the longer term.
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Moving → say → term
'Paying a daily gas standing charge can grate for households that use very little gas, and can feel illogical over the summer or when homes have the heating off.
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homes → pay → heating
'
The change should also help people who have switched to electric heating but kept a gas connection and find themselves paying a standing charge for a service they do not use for heating.
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they → help → heating
Based on current rates, a household using 7,000 kWh of gas a year could be around £40 better off under these changes, according to the comparison website.
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household → base → website
Andrew Sissons, director of innovation agency Nesta, said: 'This measure will provide relief to the poorest households who ration their gas use but it will also mean that switching to electric heating such as heat pumps is a better deal for some households that use more gas.'
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that → say → gas
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: 'Given the timeline, it is unlikely to ease the high costs this winter, and the savings will be small compared with recent bill rises, but with the cost of living still hitting budgets, any reduction will be welcome when it comes.
'
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it → say → budgets
Shifting more of the cost onto each unit of gas could also give the energy transition a boost, making heat pumps a more attractive option against a gas boiler for higher-use households.
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pumps → shift → households
How will larger families be affected?
Mr Neudegg adds: 'Large families are the group to watch.
'
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families → affect → ?
More people in a home usually means more hot water, more washing and cooking, and more heating, so they tend to use more gas.
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they → mean → gas
'When gas standing charges move onto unit rates, they’ll pay more towards these costs.
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they → move → costs
A home using 14,000 kWh of gas a year, which is Ofgem’s level for a high user, could be around £25 worse off based on current price cap rates.
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which → use → rates
Larger or less efficient homes using more than that would be hit harder.'
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homes → use → that
Lowrey said: 'Higher unit rates mean people in badly insulated homes, larger families or those who need to keep the heating on to manage a health condition, could end up paying more.
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who → say → more
'Some of them are the same vulnerable households this policy is meant to help, so making sure that they see the intended benefits of this change will be essential.
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they → mean → change
What is happening to energy bills?
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What → happen → bills
Energy bills are still rising and the financial strain on households will ramp up further next year.
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strain → rise → households
Typical energy bills, which were £1,663 a year, increased by 3.6 per cent on October 1 meaning households that pay by direct debit can expect to pay about £1,723 a year.
Ofgem sets a cap on the amount suppliers can charge customers who are on variable rate tariffs.
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who → increase → tariffs
…and 6 more, not listed.
The Aporia
