Introduction

Greater Manchester Mayor Andy Burnham has called on the UK government to explore removing standing charges from gas bills, which are fixed daily fees that customers pay regardless of energy usage and cover the cost of maintaining energy infrastructure.

What Happened

During Prime Minister's Questions, Burnham asked Chancellor John Healey and Energy Secretary Miatta Fahnbulleh to examine whether standing charges could be eliminated from gas bills. The request follows growing pressure to ease the cost-of-living crisis, particularly as energy prices are forecast to rise 16% in January. Burnham also linked the proposal to the government's decision on the Jackdaw gas field, suggesting it could free up investment in renewables. Research firm Nesta suggested that standing charges could be moved to the unit rate, meaning customers pay only for the energy they actually use.

Energy UK warned that the impact would depend on how reallocation is handled, while an influential foundation said the change would particularly benefit low-income families. Ofgem has run extensive consultations on the issue, receiving significant public response, and is running a pilot scheme on low-standing-charge tariffs, though no firm conclusions have been reached.

Why This Matters

If standing charges were removed from gas bills and shifted to the unit rate, households that use little gas could see lower fixed costs, while heavy users might face higher per-unit prices. Current average standing charges stand at 29.7p per day for gas and 54.8p per day for electricity, with the latter already having VAT reduced. Citizens Advice has warned that vulnerable customers with high energy needs could be penalised if reforms are not carefully designed. However, Madeleine Gabriel of Nesta argues that abolishing the gas standing charge and redistributing costs to the unit rate would help those worst affected by rising prices.

Key Takeaways

  • Andy Burnham has urged the government to develop a plan to remove gas standing charges, potentially saving a typical household £27 per year.
  • The proposal would shift fixed daily fees to a variable unit rate, meaning customers pay only for the energy they consume.
  • Impact would vary: low-use households could benefit, while high-use households might pay more.
  • Ofgem is consulting on the issue and running pilot tariffs, but has not yet recommended policy changes.
  • Reform must consider vulnerable consumers, as Citizens Advice warns high-usage, low-income households could be disproportionately affected.

Conclusion

The push to remove gas standing charges reflects broader concerns about energy affordability and the need for targeted support this winter. With energy prices expected to rise further, the coming Budget will be a critical moment for deciding whether these changes proceed. Burnham's proposal highlights a growing focus on restructuring energy costs to better reflect actual usage and provide relief to those most in need.