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Will energy prices rise further in 2026?
The Ofgem price cap rose by 4% on 1 October, and even bigger price hikes are expected to come in the new year.
Energy bills increased for millions of households at the start of October as the Ofgem energy price cap rose by 4%
The bill hike affected the 22 million households on a standard variable tariff (SVT), while the 11 million households on fixed rate energy tariffs didn’t see a change to their unit rates.
Ofgem says the October rise was caused by the increased wholesale cost of gas resulting from the US-Iran war, which has disrupted oil and energy supply lines since 28 February.
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With the war continuing to cause disruption, experts have warned that energy bills will continue to rise and could force the next price cap up by 16% in January 2027.
The price cap determines the maximum unit rates and daily standing charges your energy provider can charge you.
The current price cap means the average annual energy bill for the typical dual fuel UK household paying by direct debit is £1,723 for the period between October and December, 4% higher than the previous July price cap.
This headline figure is calculated by taking the average amount of energy used by the typical household and applying the new cap’s average unit rates and standing charges. Since July, Ofgem has said the ‘typical household’ is one that uses 2,500 kilowatts of electricity and 9,500 kilowatts of gas a year.
As the price cap is a limit on unit rates, your household’s energy bill can be higher or lower than the headline figure depending on your personal energy usage. The price cap also varies by region.
Where will energy prices go next?
Experts say the price cap is likely to keep rising as the Iran war continues to disrupt markets and push energy bills up for households in the UK.
The January 2027 price cap will be officially confirmed by Ofgem by 25 November, however Cornwall Insight, an energy consultancy well-regarded for the accuracy of their price cap predictions, expects it to rise by a further 16%, bringing the average annual bill to £1,999.
If the forecast turns out to be accurate, it would mean the average annual energy bill would be £276 higher in January than in October.
Cornwall Insight said the substantial increase is largely driven by conflict in the Middle East which has disrupted the gas supplies to the UK and the rest of the world.
Craig Lowrey, principal consultant at Cornwall Insight, said: “These prices are going to hit households hard. January is already a difficult month for many, with cold weather and bank balances still recovering from Christmas, and now they face the biggest price cap rise we've seen in four years. At the moment, we can't yet see an end to the volatility, and with gas stocks as low as they are, the effects of the conflict could be with us for many more months.”
Meanwhile, the latest forecasts from energy firm EDF say energy bills could surge by 27% in January, bringing the average bill up to £2,189 per year.
Government stepping in to ease energy bills
With energy prices soaring, the government has stepped in to help ease the cost on millions of households.
One-off £100 payment
From January 2027, 20 million households who live in a home in council tax bands A to D in England will receive a one-off payment of £100 to help with the cost of energy, as announced by the chancellor in the 2026 Autumn Budget.
The payment will be made directly to billpayers’ bank accounts in the form of a council tax rebate.
The government says an estimated 83% of fuel stressed households in England, and 88% of households in the bottom three income deciles, will receive the payment.
Councils will also be given an additional £100 million to provide discretionary support to households who are not eligible for the £100 rebate but are still struggling with the cost of energy.
The Scottish Government has said households in Scotland will benefit from the £100 payment for energy bills. Most households in Wales will get the payment, the Welsh Government said.
Gas standing charges to be incorporated into unit costs
The chancellor also announced that in 2027 “or as soon as possible after”, standing charges for gas will be incorporated into the unit price of gas.
The policy means that households who use more gas will pay more, while those who use less will pay less.
The government says the move could save 60% of account-holding households £45 a year.
Standing charges are fixed daily fees on your energy bill, paid regardless of whether you use any energy. Even if you don’t use a single unit of gas in a day, you will still pay a standing charge, currently worth an average of around 30p a day, or £108 a year.
Electricity standing charges will remain in place for now, but the chancellor said in the Budget that the government “will set out similar reforms” for electricity bills.
VAT removed from electricity bills
VAT was temporarily removed from electricity bills from 1 October, saving households around £45 a year, according to government estimates.
The VAT cut was set to expire on 31 March 2027, but the chancellor extended it to 1 July 2027 in the Budget.
Green levies axed from energy bills
In April, some green levies were scrapped from energy bills and moved into general taxation, pushing energy prices down.
The government estimates the move will save households £150 a year on average.
How to get help with paying your energy bills
If you’re struggling to afford your energy bills, you might be able to get help through your energy supplier.
Octopus Energy customers can get help via the Octo Assist scheme, which includes free electric blankets or waived standing charges over winter. The electric blankets are generally only for the elderly, or those with medical or mobility issues.
The British Gas Energy Trust offers grants to customers of any energy firm. For example, those on prepayment meters owing between £50 and £1,700 and credit account customers owing between £250 and £1,700 may be eligible. The full eligibility criteria is on the British Gas Energy Trust website.
Alternatively, if you’re struggling with energy bill arrears, your energy firm might let you agree to a repayment plan. It will set an amount you must repay once weekly, fortnightly or monthly, covering what you owe plus an amount for your ongoing use.
You might be able to repay your debt directly through your benefits as well, via the Fuel Direct Scheme.
Some government schemes give certain households money towards covering the cost of energy bills.
Households in receipt of some means-tested benefits who use participating energy suppliers could get the Warm Home Discount. This is £150 of credit that is automatically applied towards your energy bill during the winter.
Meanwhile, pensioners with an income of £35,000 or less could be eligible for the Winter Fuel Payment, which is worth up to £300 each winter.
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Daniel is a financial journalist at MoneyWeek, writing about personal finance, economics, property, politics, and investing.
He covers savings, political news and enjoys translating economic data into simple English, and explaining what it means for your wallet.
Daniel joined MoneyWeek in January 2025 and previously worked at The Economist in their Audience team. He read history at Emmanuel College, Cambridge and edited Cambridge's student newspaper, Varsity.
In his free time, he likes reading, walking around Hampstead Heath, and cooking overambitious meals.
