Chancellor John Healey will ask Ofgem to abolish standing charges on gas bills in Great Britain, ahead of his first budget statement. The Treasury says the change could save 60% of account-holding households an average of £45 a year, but households that use a lot of gas could end up paying more.
John Healey is abolishing standing charges on gas bills for 23m homes, according to The Guardian. Before delivering his first budget statement in the Commons on Wednesday, the chancellor said he would ask Ofgem, the energy regulator for Great Britain, to remove the charges next year or as soon as possible after.
What the charge costs and who saves
A standing charge is a fixed daily fee added on top of a household gas bill, regardless of usage. The charge is £108 a year for the typical household.
The Treasury said the move could save 60% of account-holding households an average of £45 off their annual bill. Healey called the practice unfair. According to The Guardian, Healey said: "Gas standing charges are unfair and outdated so I am scrapping them"
Heavy gas users could pay more
However, the plan is to shift the cost of standing charges into the unit rate of energy. Because of that, a household that consumes a lot of gas might end up paying more overall.
Ofgem currently caps the gas unit rate at 7.97 pence per kWh, plus a 29.68p daily standing charge. MoneySavingExpert estimated the move could add around 1p to each kWh, which would lift the typical unit rate from 7.97p to 9.11p per kWh, based on current energy prices.
The Treasury said it will set out targeted mitigation for a small number of households in the future.
Budget backdrop
Meanwhile, City investors expect Healey to avoid bold spending pledges or tax hikes in his first fiscal statement, reasoning that he will prioritise stability in the bond market. Borrowing costs are close to their highest levels in around two decades.
The Green Party said the move amounts to tinkering rather than bold action.
Sources: The Guardian, The Guardian live blog
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