Will gas and electricity bills fall? Energy price forecast

Energy bills rose by 2% on 1 October when the new Ofgem energy price cap came into effect.

The current cap means the average annual price of energy for a typical dual-fuel household consuming the average amount of energy and paying by direct debit is £1,755 a year for the period between 1 October and 31 December.

This is a hike of around £35 per year when compared to the previous July to September price cap of £1,720.

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The price cap is set on a quarterly basis by the energy regulator and around 20 million households are on variable energy tariffs that move with changes to the price cap. Those on a fixed energy deal instead lock in at a certain price for a fixed amount of time.

As the price cap figure refers to the typical annual bill for a household paying by direct debit, you may pay more or less, depending on your energy consumption.

Ofgem is set to announce the Q1 2026 price cap on 21 November – what are analysts saying about where prices will go in the new year and beyond?

Will energy bills fall further this year?

Energy prices seem likely to fall when the new price cap comes into effect on 1 January 2026, but predictions vary.

Energy consultancy Cornwall Insight, which is well-regarded for the accuracy of its price cap predictions, expects energy bills to fall to £1,733 per year in the first quarter of 2025, £22 lower than the current price cap.

Their latest prediction, made on 18 November, would represent a decrease of 1% from the Q4 2024 price cap – a more modest fall than they previously forecast in September.

From January 2026 onwards, the price cap will include a new component that pushes up bills, called the 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. Cornwall Insight expects it to push energy bills up by a little over £10 a year from January.

A number of other changes to the market that are currently under consultation by Ofgem are also incorporated into Cornwall’s forecast, with the consultancy expecting these to be introduced from the start of 2026. The expected changes would push up energy prices by around £20 a year.

Source: Cornwall Insight, 18 November

Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “January’s price cap dip might look like good news, but it’s only part of the picture. Bills are still well above pre-crisis levels and are set to climb again in April, and this time, it’s not higher wholesale prices driving the rise.

“The government pledged to lower bills on the promise that investment in renewables would reduce our reliance on global energy markets and stabilise bills. But what we’re seeing now is a shift, wholesale prices are no longer the main story.

“The real pressure is coming from rising non-energy costs, with levies and policy decisions associated with that investment in renewables driving up bills.”

Cornwall Insight’s forecast for the unit rates in the Q1 2026 price cap can be found below:

Source: Cornwall Insight, 18 November. Unit predictions do not factor in the Nuclear RAB increase or the other Ofgem changes under consultation.

What do other forecasters say?

While Cornwall Insight expects energy prices to fall by around £22, British Gas also predicts a fall, but of a more modest £5.

The energy firm therefore expects the average annual energy bill to be £1,750 in Q1 2026 and says it has a medium level of confidence in this prediction.

On the other hand, EDF energy believes energy prices will increase very slightly in January, predicting the price cap for the first quarter will go up £2 to £1,757 per year.

Looking further into the new year, predictions are again broadly in alignment that energy bills are likely to increase in the second quarter of 2026, assuming no measures to cut energy bills are included in the Autumn Budget.

British Gas expects bills to spike on 1 April, climbing by over £100 per year and remain broadly at this level until the end of the year.

Source: British Gas, accurate as of 10 November.

Meanwhile, EDF energy expects energy prices to move in a similar direction, spiking in April and then falling in July.

Source: EDF, accurate as of 29 September

Cornwall Insight expects the price cap will be £75 per year higher in April than in January with the rise being largely due to increasing operation and maintenance charges for the UK’s energy networks.

They add that this is “likely to be an enduring trend with wholesale energy prices, once the dominant driver of bills, forecast to drop to less than 40% of the cap and remain below that threshold for the rest of the decade”.

Will energy bills be cut in the Budget?

There is mounting speculation over what measures will be announced in chancellor Rachel Reeves’s Autumn Budget on 26 November. Among murmurings of potential tax rises, there are now rumours that Reeves is drawing up plans for measures that will reduce annual energy bills.

One such policy that is reportedly being considered is cutting the 5% VAT that is paid on energy bills to 0% for both gas and electricity.

A policy like this could significantly help households spend less on energy, with Cornwall Insight saying 0% VAT on energy could help reduce bills by around £80 a year.

The government neither confirmed nor denied whether energy bills will be targeted in the Budget.

The proposal also has broad support from the energy sector, with Octopus Energy (the UK's largest energy supplier) and Eon signing a letter calling on the chancellor to make lower energy bills her priority in order to help households and boost the economy.

However, while an £80 boost would be welcomed by many households, Lowrey at Cornwall Insight warns that the policy will not be a panacea.

He said: “While adjustments to subsidies or VAT may make a dent in bills, the government doesn’t have full control over many of the underlying non-wholesale costs. A large share is tied to the essential work of maintaining and operating the networks – the pipes, wires and infrastructure that keep energy flowing. That’s not something that can be switched off when prices rise, and it’s only going to grow as we build out the system for net zero.”

Ultimately, Lowrey argues that a shift to more renewable energy will bring long-term stability in the market and grant the UK a greater degree of energy independence, but acknowledges that this is not cheap.

“The upfront costs are real, and they’re landing on bills now. The challenge will be balancing short-term affordability with long-term resilience, and crucially making sure people understand why that trade-off matters. If the government doesn’t bring the public with them on the energy transition, then it risks undermining the very policies intended to support them.”

The consultancy adds that the forecast increase in the April cap will likely mean there is increased pressure on the government to keep energy bills lower. For this reason, they say it is “almost certain” that the Budget will introduce measures to ease bills.

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 includes the latest forecast from Cornwall Insight for January.

Source: Ofgem (confirmed figures) and Cornwall Insight (January forecast). Typical annual bill based on customers paying by direct debit. Latest Cornwall Insight predictions as of 18 November

Should I fix my energy?

Some fixed energy deals look competitive compared to the Ofgem energy price cap. The regulator is urging people to consider fixed-price deals, which could potentially save them hundreds of pounds a year.

Whether you should fix your energy or not depends on where prices are heading next and your attitude to risk.

Fixing now risks locking in rates that could become uncompetitive if prices drop in the new year. If prices rise, you could have saved money by fixing.

If you value cost certainty, opting for a fixed deal means you will know exactly what your outgoings will be for the next 12 months. MoneyWeek suggests weighing up the options on the market and assessing whether fixing meets your financial needs.

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 less than £35,000 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 bill payers who want to see more significant reform to how energy bills are paid.

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