Our view on gas standing charges: autumn Budget reaction
The chancellor has announced that gas standing charges will be scrapped
We think this is a positive move that will save most people money, which we know is desperately needed. We also welcome the £100 payment to most homes
Electricity standing charges are still a problem, but this is a step in the right direction
Greg Jackson, our CEO, was on the news this morning talking about the Chancellor’s decision to scrap gas standing charges, and our inbox is already full of customers asking what it means for their bills.
We think this is a good move. Standing charges are easily the most complained-about part of an energy bill, and for good reason. Before you’ve even turned on the heating, you’re paying a fixed daily fee. Right now, the gas standing charge costs an average of £108 a year, even if you don't use any gas at all.
Today’s Budget ends that for 23 million homes. The government is aiming to get rid of gas standing charges by the end of 2027, shifting those fixed costs onto the unit rate (the price you pay for the gas you actually use).
Octo-poll
We asked more than 14,000 of our customers:
Do you think removing the standing charge on gas is a good idea?
YES
75%
NO
8%
NOT SURE
17%
Why move the cost instead of just getting rid of it?
When we talk about scrapping standing charges, people, understandably, ask why the cost gets shifted onto the unit rate rather than just disappearing.
At the moment, standing charges pay for physical, real-world things that still have to happen every day. Thousands of miles of gas pipes have to be maintained, checked for safety and fixed when they leak. And gas networks charge suppliers a fixed fee for every meter connected to their pipes, so that money still has to be found. What’s changing is how we split the bill.
Until now, it worked like an unfair tax: someone living alone in a small, well-insulated flat paid the same £108 a year towards the pipes as a huge household burning five times as much gas. Putting those costs on the unit rate means you pay towards the network based on how much gas you actually use.
It’s a bit like going to a fancy restaurant with your mates who always order the steak and the chablis while you have tap water and a salad. If you split the bill equally, you’re not really getting your money’s worth. Paying for what you actually eat avoids that problem.
Getting the full benefit when you save energy
The worst thing about standing charges is that they mean people who save energy don't get the full financial benefit.
Ofgem figures suggest that homes have cut their gas consumption by 17% since 2023. Regardless of household size, people have taken control of their boilers. They’ve turned down their thermostats, lowered their boiler flow temperatures and switched off radiators in spare rooms. This should be rewarded.
At a time when events in the Middle East and Russia’s war in Ukraine are pushing global gas prices up again, getting rid of standing charges means that when you do save energy, you actually feel the reward in your pocket.
The Treasury says around 60% of households with a gas account will save an average of £45 a year once standing charges are removed.
That figure assumes zero change in behaviour. But with the fixed fee shifted onto the gas itself, every unit you cut delivers a bigger saving than it does today. That gives households much more control: even higher-usage families can save by turning down radiators in rooms they aren't using.
Plus, while some very large homes that use a lot of gas will pay a bit more, the government is offering help: a direct £100 bank payment from January 2027 for most households. It will cover all English homes in council tax bands A to D (roughly 80%), and devolved administrations in Scotland, Wales and Northern Ireland will get funding to launch their own versions of the scheme. English local authorities will get an extra £100 million to support struggling households outside bands A to D.
When you add the £45 saving from the standing charge move to the government removing VAT from electricity bills at the start of October (another £45 a year), plus cutting £135 of levies off bills in April, it’s clear that the government has taken a big chunk of unavoidable cost off bills this year.
Helping people move to cleaner heating
There’s another big benefit here too. Moving fixed costs onto the gas unit rate improves the price ratio between electricity and gas: what’s known in the industry as the spark gap. It’s basically the price difference between electricity and gas. The smaller the gap, the more people decide to upgrade to electric tech (like heat pumps).
Even before today, live data from our Cosy heat pumps showed that 99.6% of customers on smart tariffs pay less to heat their homes than they would with a gas boiler. Today’s announcement widens the gap even more, helping pave the way to a cheaper energy system for everyone.
‘Why just gas? What about electricity standing charges?’
We know what a lot of our customers are thinking today: why only gas, when electricity standing charges are the real problem?
You’re right. We’ve campaigned against egregious standing charges for years, spending £185 million keeping our standard prices below the price cap and giving out £10 million in standing charge holidays through our Octo Assist fund.
We should welcome today’s gas announcement as an excellent step. It proves standing charges can be removed.
Britain’s electricity market urgently needs reform so we can decouple electricity prices from volatile global gas prices. Right now, global gas shocks still drive up winter electricity bills, even when our wind farms are generating masses of cheap green power. The government promised "similar action to follow" on the electricity charge and we know it's looking at reforming the electricity system more widely. We hope we’ll see action on that pretty soon too.
Published on
Joe Richardson
Operations Director