Leader

Down with standing charges, up with queue-jumping

Like the unlikely hero of a Halloween horror flick, chancellor John Healey has vanquished the gas standing change ghoul.

It’s little surprise this became the centrepiece in Healey’s first Budget; he needed to make some assertive moves on energy costs and this, alongside the £100 Household Energy Payment, ticks the box – even though the reality is that most consumers will make meagre savings from the standing charge cut and the £100 will barely touch the sides of winter energy bills.

The Budget story is that 23 million households will see £108 a year disappear from their bills in 2027 “or as soon as possible”. But with the costs being folded into the unit rate, the average saving for most households will be closer to £45 a year.

Still, axing the standing charge will be well received by campaigners who have called for its demise for years, casting it as an emblem of unfair energy bills. Martin Lewis will be doing a victory lap, and fair enough.

The question now for energy suppliers is how the change will be rolled out and how they will explain it to customers – especially the ones that will be made worse off.

Those that stand to lose out include larger families, people in draughty homes and people at home all day - many of the customers retailers are obliged to look after most carefully. "Targeted mitigation" is promised "in due course". Suppliers would very much like to know when due course is, who designs it and who pays for it.

Probably the biggest, genuine win from the standing charge move is for prepayment customers – typically including some of the most vulnerable in society. Prepayment customers who self-disconnect will no longer quietly build standing charge debt while their meters sit idle - a meaningful change for some of the most stretched households.

The real risk is around timing. Implementation looks likely around October 2027 or January 2028, well after the price cap rise expected in January, which nothing in the Budget offsets. By the time the reform lands, "the government cut my bill" story could easily become "my supplier put my bill up" for millions of higher users.

Still, maybe I'm being too gloomy. After years of being told standing charges were an immovable fact of life, the sector has just watched one disappear in a single line of a Budget speech. Electricity's turn is next - suppliers might want to start drafting the FAQs now.

A less trumpeted line in the Budget, but the one which will stand out for network bosses is the new British Data Centre Covenant which promises “priority” grid connections. It wouldn’t have been a Burnham government Budget without a move like this aimed at incentivising local jobs and regional growth.

While the principle of introducing a system of prioritisation for demand connections will be widely welcomed by network leaders – again, it’s been debated for some time now – the timing may feel excruciating to heavy-eyed DNO bosses who are on the brink of submitting their ED3 business plans, with all their intricately worked-out assumptions about demand growth across their networks.

As ever, the devil will be in the detail of what “priority” connections mean in practice. For starters, how will queue-jumping from data centres fit with Ofgem connections incentives? Might it impact Ofgem’s views on investment ahead of need and advanced procurement of kit and capability? How will an allowance for “interim on-site generation” for data centres interact with grid operation and much more?

For lovers of energy flexibility, there is hope here that the Covenant might encourage the use of flexible or curtailable connections as a means of acceleration. Meanwhile, the inclusion of requirements on data centres to protect water supplies as a condition for faster connection will be a relief for water bosses troubled by ongoing drought, depending on its practicalities.

One thing’s for sure, this Budget won’t leave us short of discussion points at Utility Week Forum in a few weeks.