What are standing charges? The money you pay before you use any gas or electricity

This year's budget targeted soaring energy prices. | Canva/Getty Images

placeholder image — This year's budget targeted soaring energy prices. | Canva/Getty Images

The move has been presented as part of a raft of measures to tackle rising household costs,

Chancellor John Healey delivered his first budget since taking on the job, unveiling no fewer than 98 policy changes in a sppech that lasted around an hour.

Many of the decisions have been made in order to targer the cost of living crisis, and in particular to bring down spiraling energy bills.

One of the most eye-catching moves was relating to gas bill standing charges.

Here’s everything you need to know about these daily charges that we all pay, and what the budget means for their future.

What are energy standing charges?

A standing charge is a daily amount of money added to your energy bill that stays the same no matter how much energy you use. In other words, if you didn’t use any electricty or gas you still have to pay a daily rate.

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What do energy companies use the money generated by standing orders for?

Energy companies say that the standing charge is to pay for expenses separate from the energy you are using, including, according to Octopus Energy:

Maintaining the grid: Upgrading and repairing the national network of wires, pipes, and pylons that physically carry energy to your house.
Supplier costs: General expenses for suppliers like us, including customer support.
Government initiatives: Funding for some national environmental schemes and financial support programs for vulnerable households.
Costs of failed suppliers: When electricity suppliers go bust, the cost of moving their customers to a new supplier and protecting their credit balances goes on to the standing charge (when gas suppliers go bust, those costs are usually added on to the unit rate).

How much is the typical standing charge?

Standing charges vary depending on your energy company and where you live in the UK.

For gas it is currently capped at 29.65p per day, or just over £108 per year.

In the case of electricity it is capped at 54.83p per day, or just over £200 per year.

What happened to standing charges in the Budget?

Chancellor John Healey called standing charges “unfair and outdated” in the Budget and announced that energy companies would be forced to scrap gas standard charges in 2027 or “as soon as possible after”, meaning that householders will only be charged for the unit cost of the gas they use.

Prime Minister Andy Burnham said: “Abolishing gas standing charges is about basic fairness and giving people more control over their bills.

“I am determined to reform our broken energy market, so it better serves the public interest.”

How much money will I save?

Unfortunately it won’t be as simple as householders simply saving the £108-per-year in standing charges, as some of that cash will be clawed back by companies in the unit cost of gas. The treasury estimates, however, that the move will save 60 per cent of gas-powered households an average of £45 each year. Only large users of gas will end up paying more.