Millions of households are set to see gas standing charges scrapped from 2027, in a major shake-up that could save some families money on their energy bills.
The Treasury has announced that Chancellor John Healey will ask energy regulator Ofgem to remove the fixed daily fees “in 2027 or as soon as possible after”.
Standing charges are added to gas bills regardless of how much energy a household uses. They cover the cost of delivering gas to homes and businesses and currently cost a typical household around £108 a year.
The change is expected to affect around 23 million homes, with the Treasury saying the move could save 60% of households an average of £45 a year.
However, the charges will not simply disappear from the energy system. Instead, the fixed costs will be transferred to the unit rate customers pay for each unit of gas they use.
This means households that use less gas could benefit, while those that use more may face higher costs per unit.
Prime Minister Andy Burnham said: “Abolishing gas standing charges is about basic fairness and giving people more control over their bills.
“I am determined to reform our broken energy market, so it better serves the public interest.”
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: "Removing the gas standing charge will bring real relief to many low-income households who use very little energy and for prepayment customers it could stop debt building up in the summer months.
"It's also welcome that the Chancellor acknowledges that wider measures are needed to bring down bills and we will wait to see if he matches these words with more action in the Budget later."
Mr Healey added: “Gas standing charges are unfair and outdated so I am scrapping them to give millions of households a bit of breathing space.
“My Budget will draw a line in the sand on an energy policy that has failed British billpayers for years, letting extra costs on bills pile high and leaving households even more exposed to global shocks.”
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The announcement comes as Mr Healey prepares to deliver his first Budget in the Commons on Wednesday afternoon.
The Chancellor said the change would give families “breathing space” while making the energy system fairer.
The precise timing of the change will depend on Ofgem, which has been asked to implement the reform from 2027 or as soon as possible afterwards.
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