UK plans to remove gas bill standing charges as household energy costs rise

Highlights

UK government reviews removal of standing charges from household gas bills, which could save a typical household about £27 a year, benefiting low-usage and lower-income consumers.
The government formally approves the Jackdaw North Sea gasfield, aiming to strengthen energy security and support Aberdeen jobs amid criticism from environmental groups.
Cornwall Insight projects a 16 per cent rise in the energy price cap for January 2025, while Budget proposals include increasing the Warm Home Discount Scheme for 6 million households from £150 to £250.

Gas billing reform under review

As reported by Financial Times, Andy Burnham says he has asked chancellor John Healey and energy secretary Miatta Fahnbulleh to report back "at the earliest opportunity" on removing standing charges from household gas bills. He sets out the plan in the House of Commons on Wednesday as the government looks for ways to ease pressure on consumers this winter.

Standing charges are fixed daily fees paid regardless of usage, helping cover network upgrades and other costs. Burnham does not give details of how the policy would work, but energy experts say the most likely outcome is that the same costs are recovered through the gas unit rate instead of a daily fee.

The shift could benefit households that use relatively small amounts of gas, although the savings are expected to be modest. It could also raise costs for heavier users, meaning the overall design would need careful balancing.

Analysis by Nesta suggests a typical household could save about £27 a year under such a model. Madeleine Gabriel of Nesta says moving standing charge costs into the unit rate would help households hardest hit by rising prices because the current fixed charge takes up a larger share of lower-income households' bills.

Pressure on ministers over winter energy costs

The proposal comes as the government formally approves the Jackdaw gasfield in the UK North Sea, linking domestic energy supply and affordability more closely in the political debate. Burnham tells MPs that rejecting the project would simply mean importing gas from elsewhere rather than using UK reserves, and he argues the development can help protect jobs in Aberdeen.

Jackdaw, located 150 miles east of Aberdeen, receives approval after years of legal and political disputes. Environmental campaigners immediately criticise the move, with Green Party leader Zack Polanski calling it a betrayal of future generations.

The government presents the decision as part of a wider energy security strategy after disruption to global fossil fuel supplies following the Iran war. Cornwall Insight predicts the energy price cap for typical household bills will rise by 16 per cent in January, increasing pressure on ministers to provide support.

Healey has already prepared plans for the Budget next week to expand the Warm Home Discount Scheme for benefit recipients from £150 to £250, at an estimated cost of about £600 million, according to people familiar with the negotiations. The support would cover 6 million of the UK's 29 million households, while the current six-month suspension of VAT on electricity is saving an average household £45.

At the same time, some ministers are pushing for broader action before the Budget on October 28. Potential options under discussion include cutting standing charges on gas bills and removing other levies, including subsidies linked to renewable energy schemes such as feed-in tariffs.

Our earlier article covered Chancellor John Healey’s pledge to stick with deficit-reduction plans ahead of the October 28 Budget, even as the government looks for ways to offer limited relief on living costs. It also noted the UK’s modest 0.1% GDP growth in August and the mounting political pressure on Healey over how to support households and the wider economy amid ongoing energy-related strains.

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