Could gas standing charges be axed from energy bills? Burnham asks Chancellor to see if it's 'feasible'

Scrapping standing charges on gas bills could be on the cards for millions of Britons in the Budget next week. 

Andy Burnham has asked Chancellor John Healey and Energy Secretary Miatta Fahnbulleh to look at whether it was feasible to axe standing charges from gas bills 'at the earliest opportunity'.

Standing charges are added to people's energy bills. They are daily fixed charges people pay irrespective of how much energy they use. 

If you do not use any energy in a day, the standing charge will still apply. 

The money from standing charges is meant to be used to cover network upgrades and other additional costs energy firms incur.  

Under the current energy price cap, average standing charges for bills paid via direct debit are 55.83p per day for electricity and 29.68p a day for gas, costing around £200 a year for electricity and approximately £108 a year for gas.

Speaking in the House of Commons today, the Prime Minister did not give any detail about his plans for standing charges on gas bills. But he has a few options open to him. 

Some experts think the sums previously raked in from standing charges on gas bills could be recovered via the unit rate of gas instead of a daily fixed fee. 

If this happens, households who used a lot of gas would be penalised more financially, but those who do not use much gas would fare better. 

An analysis by research foundation Nesta found that if the government recovered absent standing charges via the unit rate of gas, households would typically shave about £27 a year from their energy bills. 

Nesta estimated that 86 per cent of the poorest households would be better off with the gas standing charge abolished, compared with only 24 per cent of the wealthiest.  

Madeleine Gabriel, director of sustainable future at Nesta, said: 'Abolishing the gas standing charge and moving those costs onto the unit rate would help those worst hit by rising energy prices. 

'This is because the gas standing charge currently takes up a bigger chunk of the bills that lower income households have to pay.'

Energy regulator Ofgem has previously insisted that standing charges are 'used to recover the costs required to provide energy company services, including providing and maintaining the wires, pipes and cables that deliver power to a customer’s door, through to the staff and buildings required for the energy business to function'. 

Healey has already signalled that more help for the poorest, including those on benefits, will be announced in next week's Budget. 

Healey is expected to announce next week that the Warm Home Discount Scheme for people on benefits will rise from £150 to £250, at a cost of around £600million. 

Around six million people in Britain would benefit from the scheme. 

Labour has already scrapped VAT on electricity bills for six months, saving an average of £45 per household. 

Typical energy bills, which were £1,663 a year, increased by 3.6 per cent on October 1, meaning households that pay by direct debit can expect to pay about £1,723 a year. 

Ofgem sets a cap on the amount suppliers can charge customers who are on variable rate tariffs. The energy price cap is designed to protect households from being overcharged.  

But energy prices are volatile and beholden to geopolitical events. War in the Middle East has been disrupting supply, which pushes up wholesale prices.

And further pain is expected for households next year. Consultancy firm Cornwall Insight said it expected the January 2027 energy price cap to rise by 16 per cent – or £1,999 – piling pressure on Labour to intervene. 

The Government conceded that the new Jackdaw gas field site in the North Sea, which it gave the green light to today, would not help bring people's energy bills down. 

While gas standing charges are broadly similar to a decade ago, electricity standing charges are far higher.

A decade ago, electricity standing charges were roughly 15p-20p a day, compared to the 55.83p price cap set level today