Will gas and electricity bills fall in 2026? Latest energy price forecast
Energy bills are widely expected to rise in summer due to the conflict in the Middle East. How much could you pay?
Energy prices for millions of households in the UK fell in April, but conflict in the Middle East means costs are expected to soar in the summer and beyond.
The US-Iran war has led to an increase in the wholesale price of energy as global supply lines have been heavily disrupted since 28 February. These elevated wholesale prices are expected to feed into higher costs for households and businesses in the UK.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Where are energy prices now?
Gas and electricity bills for millions of households fell by 7% on 1 April.
The current energy price cap has brought the annual average energy bill for a dual-fuel household paying for their energy by direct debit to £1,641.
Note that the cap is a limit on unit prices, not your total bill, so your actual bill can be higher or lower than this depending on how much energy you consume.
The fall in energy bills is thanks to the government removing some levies for environmental schemes from household bills. They will be funded through general taxation instead.
The government said the majority of households in the UK will benefit from this move, which it says is worth around £150 for households, even those on fixed tariffs, tracker tariffs and time-of-use tariffs.
The savings will come despite an overall increase to the cost of servicing the UK’s energy infrastructure that was set to increase bills by around £57 per year had the government not stepped in.
But the US-Iran conflict means these savings are probably going to be short-lived.
Where will energy prices go from July onwards?
Energy regulator Ofgem will confirm the next price cap, covering the July to September period, by 27 May. It is widely expected to announce an increase in prices.
Cornwall Insight, an energy consultancy well-regarded for the accuracy of its price cap predictions, expects the July price cap to rise by 13% to £1,850 per year – an increase of around £209.
The prediction was made based on figures from the end of 18 May.
The main driver of the expected bill hikes is the rising wholesale price of energy, which climbed sharply following the US and Israeli air strikes on Iran on 28 February, the consultancy said.
The attacks, as well as subsequent retaliatory attacks by Iran, damaged energy infrastructure in the Gulf and led to the closing of the Strait of Hormuz, a vital waterway between Iran and Oman through which 20% of the world’s oil and gas is transported.
With the supply of energy disrupted by the war, wholesale prices have climbed, and these rises will be reflected in the next price cap.
The latest forecast is a world away from where the consultancy expected energy prices to go before the conflict began, when it forecasted them to rise modestly to an average of £1,645 a year in July, broadly the same as the current price cap.
Craig Lowrey, principal consultant at Cornwall Insight, said: “Over the past few months, we've watched our forecasts shift from showing virtually no quarter-on-quarter increase to a 13% rise in current bills – with this change due to the impacts of the Middle East conflict.
“A summer rise will be painful for households, but the bigger concern is October when household demand traditionally picks up. If the cap stays at a similar level as July, that is when the Government will need to think seriously about targeted support for the most vulnerable.
“As a net importer of liquefied natural gas, global price shocks have hit us hard, and that vulnerability isn't going away.”
Lowrey added that while short-term government support would help protect the most vulnerable households, it will not address the underlying problem.
He said: “Building out our renewable capacity is the only real path to bills that aren't as exposed to events thousands of miles away. It won't be cheap, and bills will not see an immediate drop, but that is the direction of travel if we want genuine, lasting stability.”
What do other forecasters say?
Most forecasters agree that energy prices are set to rise in July and beyond.
Economists at the Bank of England (BoE) expect household energy prices to increase in the summer when the July price cap kicks in, helping push inflation to 3.6% or 3.7% by the end of 2026.
The BoE used these forecasts to help inform its decision to hold interest rates at 3.75% at the most recent meeting of ratesetters at the Monetary Policy Committee in April.
EDF Energy expects the annual price cap will rise by £206 on 1 July, from £1,641 per year to £1,847 and says prices could rise again in October, to £1,929, and start 2027 at £1,941.
Meanwhile, British Gas expects the price cap to rise to £1,850 per year on 1 July, then £1,945 on 1 October, and £1,955 on 1 January 2027.
Why will energy prices only start rising from July?
Ofgem calculates the price cap by observing the average wholesale price of energy over a three-month period and then working out an average.
This average is then used to set the next price cap which is in place for three months. This means there is a delay between current wholesale prices and the price we pay for our energy.
This delay means households on the price cap are currently not feeling the pain of increased energy costs due to the Iran war.
However, they are set to feel it in July as the observation period for the July cap has included the soaring wholesale price of energy.
How to get help with paying your energy bills
If you’re struggling to afford your energy bills, your energy supplier may offer support with 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. It is applied 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.
As it becomes increasingly likely that the Iran war will raise energy prices, chancellor Rachel Reeves has said she is looking into the possibility of providing government support in the autumn.
If government support is given, it would be specifically targeted “for those who need it most”, the chancellor said in an interview with the BBC on 1 April.
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.
