UK Chancellor John Healey has announced a plan to eliminate daily fixed gas standing charges by 2027.. The Treasury intends to move these costs into the per-kWh unit rate to provide financial relief to millions of British households.
From 29.68p daily fees to a per-kWh model
Current gas bills in the UK include a fixed daily fee that customers must pay regardless of their actual consumption. As reported by the Treasury, the average daily standing charge for direct-debit gas bills currently sits at 29.68p, which amounts to roughly £108 per year for a typical household. These fees are traditionally used to cover the costs of network upgrades and other essential infrastructure expenses incurred by energy firms.
Under the new policy, these fixed costs will no longer appear as a separate line item on monthly statements. Instead, the Treasury will ask Ofgem to integrate these expenses directly into the per-kilowatt-hour (kWh) unit rate. This means the total cost of gas will be reflected entirely by how much energy a consumer actually uses, rather than a baseline fee for being connected to the grid.
Why 60% of households could save an average of £45
The Treasury's proposed restructuring targets significant savings for the majority of the British public. According to the Chancellor's announcement, approximately 60% of households are expected to save an average of £45 per year once the standing charges are removed. This shift is particularly beneficial for low-usage homes, such as those in smaller properties or households that have transitioned to electric heating systems.
For example, a household that consumes approximately 7,000 kWh of gas annually could see its total costs drop by about £40 under this new scheme.. By removing the "entry fee" of the daily standing charge, the government hopes to provide much-needed breathing space for families facing rising living costs.
The 2027 timeline for Ofgem’s price cap adjustment
The implementation of this policy is slated for the near future, though it is not an immediate change. The government is targeting either October 1, 2027, or January 1, 2028, to coincide with the announcement of a new Ofgem price cap.. This timeline allows the regulator to recalibrate the pricing structures necessary to absorb the standing charge revenue into the unit rates.
It is important to note that this specific reform applies only to gas. While the Chancellor is moving to scrap gas standing charges, electricity standing charges are expected to remain unchanged for the time being.
Will high-usage families face a hidden energy tax?
High-usage households face a different economic reality under this proposed model. While the majority of citizens will see lower bills, the report notes that families using more than 14,000 kWh of gas per year—the threshold Ofgem defines as a "high user"—may see a modest increase in their total costs.. Because the standing charge revenue must be recovered through the unit rate, the price per kWh will naturally rise to compensate for the loss of the daily fee.
This raises several critical questions that remain unanswered: How much exactly will the per-kWh rate increase to cover the lost standing charge revenue? Furthermore,how will the government protect vulnerable households in poorly insulated homes that naturally fall into the high-usage category? Without specific figures on the new unit rates, it remains unclear if the relief for the 60% will be offset by a disproportionate burden on larger,energy-intensive families .
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