Andy Burnham asks ministers to examine removing gas standing charges
The prime minister has requested a review of the daily gas charge, but its effect on household bills will depend on how the costs are recovered.
UK Prime Minister Andy Burnham said at Prime Minister’s Questions on 21 October that he had asked the Chancellor and Energy Secretary to examine removing standing charges from household gas bills. The government has not said how it would recover the costs those charges currently cover, leaving the effect on customers’ bills unclear.
Burnham asked Chancellor John Healey and Energy Secretary Miatta Fahnbulleh to look at whether the charges could be removed and report back to the House of Commons ‘at the earliest opportunity’. His request starts an examination; it does not change bills now.
How a change could affect gas bills
A standing charge is a fixed daily amount paid regardless of how much gas a household uses. The BBC put the average gas charge at 29.7p a day, alongside an average electricity standing charge of 54.8p. The Evening Standard gave the gas figure as 29.68p a day, equivalent to roughly £108 over a year. That annual amount is the current charge, rather than an estimate of what any household would save after a change.
Research firm Nesta has suggested moving standing charges onto the price paid for each unit of gas, the BBC reported. Under that approach, households using relatively little gas could pay less, while heavier users could pay more. Energy UK said the outcome would depend on where and how the costs were reallocated.
Standing charges help pay to transport energy to homes and maintain pipes and wires. They also fund support schemes for low-income households, according to the BBC. Citizens Advice has warned that a change could penalise vulnerable customers who have low incomes but high energy needs. The government has yet to explain how it would protect those households or fund the costs now collected through the charge.
Why Burnham raised the proposal at PMQs
Burnham made the announcement while defending the government’s approval of drilling at the Jackdaw gas field in the North Sea, the Evening Standard reported. Responding to Conservative leader Kemi Badenoch, he called the decision ‘pragmatic’ and said it would allow investment in renewables as well as further help with bills.
Burnham also said renewable investment could substantially loosen the link between gas and electricity prices during this parliament. Gas prices heavily influence UK electricity prices, the BBC reported. Asked why the proposed review did not cover electricity standing charges, the prime minister’s spokesman pointed to a cut in VAT on electricity bills.
Energy regulator Ofgem has consulted on standing charges for nearly two years and is testing tariffs with lower standing charges. It has not reached firm conclusions from that pilot, the BBC reported. Burnham has asked ministers to report back, but gave no date for their findings.
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Sources and context
- Andy Burnham proposes plan to cut standing charges from gas billsBBC
- Chancellor investigating removal of gas bill standing charges to save households £108Evening Standard
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