What scrapping the gas standing charge does to the cost of heating

Announced in the Budget on 28 October, and barely noticed beneath the £100 council tax rebate: the government has asked Ofgem to abolish gas standing charges on domestic bills in Great Britain, by the end of 2027 or as soon as possible after that.

It sounds like a straightforward saving, and for a lot of people it will be. But the money is not going away. In the Budget’s own words, Ofgem “will ensure that energy suppliers recover these costs through gas unit rates instead”. What was a fixed charge becomes a charge on every unit you burn.

For anyone comparing a gas boiler with a heat pump or an air conditioner, that matters more than the headline, because it changes the number this whole argument turns on.

What is actually moving

At the current cap, the gas standing charge is 29.68p a day. Over a year that is £108.33, which is the £108 in the Budget. It is paid whether you use gas or not.

Ofgem has not designed the replacement, so the following is an illustration and not a forecast. If you spread that £108.33 evenly over the 9,500 kWh Ofgem uses for a typical household, the gas unit rate rises by about 1.14p:

The real uplift may well be different. The government describes the “typical household on median gas consumption” as benefiting, which suggests the costs are being spread across more gas than that household uses. Treat 1.14p as a way of seeing the shape of the change.

Who gains and who pays more

On those figures, the change to a year’s gas bill looks like this:

So a well insulated flat gains. A large, older, draughty house pays more, and so does anybody who has to keep the heating on all day. The government says as much, describing “some vulnerable households who use high amounts of gas, which they can’t avoid” and promising targeted mitigation, without yet saying what that means.

The other group who gain are people who barely use gas at all: a hob and nothing else, or an empty property. They stop paying over £100 a year for the connection.

What it does to a heat pump

Here is the bit that matters on this site. Electric heat competes with gas on the price of a unit of useful heat, and this raises the gas side of that comparison.

The seasonal efficiency a heat pump needs to match a 90% boiler falls from about 3.0 to about 2.6. That is a real shift. We showed in what the October 2026 price cap changes that the crossover had only just tipped to the heat pump at a SCOP of 3.0. On this illustration it stops being close.

Why that overstates it for most houses

Now the catch, because the table above flatters the change.

If you replace your boiler with a heat pump and disconnect from gas, you already escape the standing charge. Take the typical household: 9,500 kWh of gas at 90% gives 8,550 kWh of heat.

The gap is £115.36 a year before and after. For a household making a clean switch, the sum has not changed at all. The unit price of gas went up by exactly as much as the fixed charge fell.

What changes is the case for doing it partly.

The people who really gain: hybrids

Today, if you keep a gas connection for any reason, you pay the whole £108 however little you use. That makes partial steps look bad: every unit of gas you avoid saves only the unit rate, and the fixed charge sits there regardless.

Take that charge away and every unit avoided saves more. That improves the sums for anyone using electric heat in only part of the house, which is where an air conditioner in heating mode comes in.

An example, using a reversible unit with a SCOP of 4 that takes over 1,500 kWh of heat from a 90% boiler each year:

Neither is going to pay for a machine on its own. If you are buying one for summer cooling, though, its winter value just went up by more than half. See what the cold does to heating efficiency before relying on a SCOP of 4 in January, because the figure falls when the weather does.

What could change these numbers

Three things sit between this and your bill.

The January cap. Ofgem is due to announce the January to March 2027 level on 25 November. Cornwall Insight’s forecast, as of mid October, is £1,999 a year, up from £1,723. It is a forecast, and every rate on this page changes when the real figure lands.

VAT on electricity. All the electricity figures here carry no VAT. The Budget extended that cut until July 2027, which it expects to take around £50 off the annual cap in April. What happens after that moves the ratio as much as this reform does.

Electricity standing charges. They are the bigger of the two, at about £200 a year, and the government has committed to reforming them, with details next year. If that money also moves onto the unit rate, it pushes against everything above, because a heat pump is exactly the kind of machine that buys a lot of electricity units.

What to do

Do nothing to your bill yet. There is nothing to claim and nothing to switch. Nothing changes until Ofgem has designed it.

Do not fix a decision on this. If you are choosing a boiler or a heat pump this winter, use today’s rates and treat this as a possible tailwind, not a number to rely on. Our running cost calculator will take your own tariff, and the grant position hasn’t changed.

Find your annual gas use. It is on your annual statement. Below about 9,500 kWh you are likely to gain from this, and above it you are likely to pay more. That is worth knowing before the arguments start.

Check the £100. Separately, the Budget announced a £100 Household Energy Payment for council tax bands A to D in England, from January 2027. If you pay by direct debit you do not need to do anything.

The policy is set out in the government’s energy bills explainer, and the current rates in Ofgem’s cap announcement.