Will gas and electricity bills fall? Energy price forecast

Energy bills will rise slightly at the start of the New Year, with the average household on the price cap paying 0.2% more for their energy.

Under the new price cap, the average annual energy bill will be £1,758 for the quarter, for a dual-fuel household paying by direct debit. It was £1,755 a year for the period between 1 October and 31 December 2025.

Ofgem’s energy price cap, which changes every three months, has drastically fallen since 2022, when it would have peaked at £4,279 if not for the Energy Price Guarantee. But average annual energy bills have consistently remained north of £1,500.

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The aim of the price cap, set by the regulator Ofgem, is to ensure households aren’t overcharged for gas and electricity while reflecting higher wholesale costs being paid by suppliers.

Any maintenance or upgrades needed to the energy network and government schemes like the Sizewell C nuclear project are also factored in.

The price cap figure refers to the typical annual bill for a household on a dual-fuel tariff paying by direct debit, so you may pay more or less, depending on your energy consumption and how you pay.

But where is the price cap forecast to go in 2026? We look at what the experts and analysts are predicting.

Will energy bills fall next year?

Ofgem has confirmed the price cap will increase by 0.2% in the first quarter of the new year.

For the average household on a default dual-fuel tariff (which covers gas and electricity), paying by direct debit, this means their bills will rise to £1,758 a year from 1 January, around 28p extra per month.

The January to March 2026 price cap can be found below:

Source: Ofgem

The small rise comes as new charges will be included within the cap from 1 January, pushing up household prices despite the cost of wholesale energy falling. The most significant of these is the new Regulated Asset Base (RAB).

The RAB is designed to raise money to support investment in new nuclear power stations by spreading the costs of construction and operation across consumer bills.

The main nuclear project this is currently funding is the Sizewell C project in Suffolk, which the government has committed £14 billion to. Ministers say, once built, the site will produce enough electricity to power roughly six million homes and protect households from volatility in the wholesale gas market.

Where will energy prices go next year?

While energy prices will increase fractionally in the first quarter of 2026, a much bigger shake-up is to be expected in April.

In the Autumn Budget, chancellor Rachel Reeves said average household energy bills will be cut by around £150 a year after she announced some green levies will be axed in April 2026.

The chancellor said 75% of the costs of the Renewables Obligation, which places an obligation on suppliers to buy renewable energy, will be taken off household energy bills for three years.

She also announced the blighted Energy Company Obligation (ECO) scheme, which requires some suppliers to help low-income households increase their energy efficiency by installing energy-saving measures, will not be extended past March 2026.

By removing the green levies, the chancellor expects to shed around £150 from annual household energy bills. Energy consultancy Cornwall Insight estimates savings to be slightly less, at £145.

Before the measures were announced, forecasters were expecting a steep increase in the price cap in April 2026, possibly as much as £57 according to Cornwall Insight, so the £150 drop in bills will come as a positive to households.

Cornwall Insight, which is well-regarded for the accuracy of its price cap predictions, now forecasts the April price cap to be £1,675 per year for a typical dual fuel consumer, down £83 from the January cap.

Craig Lowrey, principal consultant at Cornwall Insight, said: “Lower bills are always welcome, but we need to be realistic about what these measures achieve. Shifting some levies around does not remove the costs of running and decarbonising our energy system, it simply changes how they’re paid for.”

Lowrey added that while the policy will “take the sting out of energy bills right now,” the cost of cutting bills will be picked up elsewhere.

“Moving them to general taxation may mean those paying more tax shoulder a bigger share, so you could say it spreads the burden. But for most households, it won’t make a huge difference to what’s in their pocket.”

What do other forecasters say?

EDF Energy has predicted the annual price cap will fall by £101 in April to £1,657, as the removal of environmental levies will offset the rise in bills previously expected.

The firm then expects prices to fall in the summer, dropping to £1,630 a year in Q3, before rising marginally to £1,636 in the final quarter of 2026.

You should take these predictions with a pinch of salt, however, as it is very difficult to accurately forecast where energy prices will go so far in the future, particularly because the wholesale energy market can be so volatile.

Source: EDF, accurate as of 17 December

British Gas also publishes price cap forecasts. The firm agrees that energy prices will fall in April thanks to the government’s bill cut, expecting the price of energy to fall to £1,645 a year in the second quarter of 2026, less than EDF expects.

They also think bills will dip by £5 a year more than EDF in the third quarter of the year, anticipating a fall to £1,625, before a small rise in the final quarter of the year.

As with the previous set of predictions, you should take these with a pinch of salt.

Source: British Gas, accurate as of 17 December

Will customers on fixed energy tariffs get £150 off their energy in April?

Customers on variable tariffs will have welcomed the government’s announcement that the axing of green levies will reduce their energy bills by around £150 from April. But some uncertainty remains for those who decided to fix their energy bills.

If you fix your energy bills, you enter into a contract with your energy supplier that you will pay a certain amount for your energy for a set period of time, no matter if prices rise or fall.

It means customers on fixed tariffs may not feel the benefits of the cut, depending on the decisions of their energy supplier.

Energy secretary Ed Milliband said on 17 December that he has written to suppliers, telling them to pass the savings on to customers with a fixed tariff.

In a post on X (formerly Twitter), he said: “We're taking an average of £150 off the costs of energy bills from 1 April. Some suppliers have already confirmed that they will pass these savings onto customers. The rest must do the same.”

Suppliers who have already confirmed that they will pass the savings on to fixed rate customers include British Gas, E.on, EDF, Octopus, Ovo, and many more.

If you are on a fixed deal and want to know whether the £150 cut will be passed on to your bill, you should contact your supplier and ask.

Where are prices going to go in the longer term?

Energy bills are expected to rise over the next five years to fund a £28 billion investment in the energy network.

Energy firms were given the green light to upgrade power and gas grids in December 2025, but households will have to pay for it through their bills.

Ofgem said household electricity and gas bills will rise by a net of £30 per year by 2031. This factors in any savings that will be made by consumers due to the upgrades.

The regulator said it would hold firms to account for delivering any upgrades on time and on budget.

What do rising energy prices mean for you?

As the energy price cap rose on 1 October, households on a variable tariff will find they are paying slightly more for their energy than they did between July and September.

While Ofgem estimates the average annual bill for the last quarter of 2025 is £1,755, some households will pay more than this and some will pay less.

This is because unit costs and standing charges are capped, not energy bills. Households that use more gas and/or electricity could end up paying significantly more while ones that restrict their energy usage will pay less.

The below table summarises how unit costs and standing charges have changed over the course of this year. It also has the latest forecast from Cornwall Insight for April, which includes the expected savings from the chancellor’s green levy cut.

Source: Ofgem (confirmed figures) and Cornwall Insight (April forecast). Typical annual bill based on customers paying by direct debit. Latest Cornwall Insight predictions as of 30 November.

Should I fix my energy?

There are a number of fixed energy deals on the market currently charging up to 13% less than the current price cap, meaning there are some savings to be had.

However, with energy bills falling by around £150 from April, these savings could be partially offset if your supplier does not pass the savings onto you. But if you prefer certainty over what you’re paying, a fixed deal could be for you.

Fixed energy tariffs don’t fix what you pay, just the rate for each unit of gas and electricity for a fixed amount of time, usually 12 months.

For more information on whether or not you should fix your energy bills, read our article on if you should switch to a fixed energy tariff.

How to keep energy bills low

To help you keep energy bills low, we have gathered some top tips in our article looking at 14 ways to reduce your energy costs.

If you're interested in the best ways to improve your energy efficiency and reduce costs, we explore radiators versus electric heaters, heated airers versus tumble dryers, and wood burning stoves versus central heating in separate articles.

How to get help with paying your energy bills

If you’re struggling to afford your energy bills, don’t bury your head in the sand and build up large debts.

Your energy supplier may offer support, for example, some suppliers have hardship grants. Octopus Energy has Octo Assist and British Gas has the British Gas Energy Trust.

You may be able to get a repayment holiday. This is where you ask your supplier to pause your repayments for a short amount of time to give you some breathing space.

Another option is to agree to an affordable payment plan. You will pay fixed amounts over a set period of time, which will cover what you owe plus an amount for your current use.

If you are on benefits, you might be able to repay your debt directly from your benefits through the Fuel Direct Scheme.

According to Citizens Advice, the Fuel Direct Scheme can be a good option if you can’t agree on a plan to pay back your debt, and it’s usually better than getting a prepayment meter.

Additionally, some government schemes give some households money towards paying their energy bills.

The Warm Home Discount is offered to households in receipt of some means-tested benefits who use participating energy suppliers and provides £150 of credit that is automatically paid towards your energy bill.

Meanwhile, if you are a pensioner with an income of £35,000 or less, you will be eligible for the Winter Fuel Payment, which provides retirees with up to £300 each winter.

What’s happening with standing charges?

The current standing charge regime is set to be shaken up by Ofgem after consumers criticised the current system as being unfair.

Under new plans from the energy regulator, households are set to be given the choice to pay lower standing charges, but at the cost of higher unit costs.

Every major energy firm will be required to offer their customers this choice by the end of January 2026 – but Ofgem has warned that energy bills are unlikely to fall. Instead, fees will simply be moved from one part of the bill to another.

Whether you should switch to the new tariff with lower standing charges in January 2026 depends on your own personal circumstances. Ofgem recommended households should ‘consider their circumstances and seek advice from their supplier or consumer groups’ to see if switching to a new tariff is best for them.

While some consumers may find this new option helpful, the results of the consultation have come as a blow to billpayers who want to see more significant reform to how energy bills are paid.

Other organisations, such as trade body Energy UK, have argued that this reform will simply serve to further complicate standing charges for consumers.