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.

The price cap for the first quarter of 2026 will rise by 0.2%, bringing the average annual energy bill to £1,758, just £3 more than it currently is.

But where will prices go beyond the first three months of 2026? We look at what analysts are saying.

Will energy bills fall next year?

Energy prices will not immediately fall in 2026, Ofgem has confirmed, as the price cap will rise by 0.2% for the first quarter of the new year.

It means the average family on a variable dual-fuel tariff, paying by direct debit, will have an annual energy bill of £1,758 in the first three months of 2026.

The rise means households will pay around an extra 28p per month, or £3.36 a year between January and March, compared to now.

The minute rise comes despite the falling cost of wholesale energy as new charges are being included within the price cap. 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. Ofgem says it adds around £1 a month to energy bills.

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

Source: Ofgem

Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “As expected, the January price cap is pretty much holding steady compared to October, but the story doesn’t end there. Our forecast shows bills climbing again in April, but not because of wholesale energy – it’s down to the non-energy costs that keep the system running and future proofed.”

Where will energy prices go next year?

While energy prices will have a practically imperceptible rise in the first quarter of 2026, a much larger hike seems to be on the horizon in April.

Forecasts by energy consultancy Cornwall Insight, who are well-regarded for the accuracy of their price cap predictions, expect bills to rise to an average of £1,815 in the second quarter of the new year.

If correct, this would mean a £57 rise from the January cap, largely due to the increased cost of operating and maintaining the UK’s energy networks.

The breakdown of Cornwall Insight’s forecast can be found below.

Source: Cornwall Insight, 21 November

Forecasting further into the future, Cornwall says it expects energy prices to drop slightly in July for the third quarter of 2026, but remain above January levels.

What do other forecasters say?

Forecasters are united in expecting the price cap to rise in April for the second quarter of 2026.

EDF Energy believes the price cap will climb by £83 to £1,841, but says it has ‘low’ confidence in the prediction.

Meanwhile, British Gas says it expects prices to rise slightly more, by £87 to £1,845. It says it has ‘very low’ confidence in this prediction.

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

British Gas’s price cap predictions can be found below.

Source: British Gas, accurate as of 18 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 21 November

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.

Lowrey at Cornwall Insight warns that the policy will not be a panacea, saying: “There has been widespread speculation as to whether the chancellor could potentially reduce energy bills – whether through removing VAT or adjusting levies. However, the reality is that this is a zero-sum outcome.

“These costs will still need to be recovered, whether through bills or through taxes, as the pipes, wires, and networks that keep the lights on still need investment as we move to a cleaner, more secure energy system. On top of that, policy costs, like support for nuclear projects and schemes to protect vulnerable households all come with a price tag. Shuffling these costs around might make energy bills look lower, but it won’t deliver real and enduring savings for most households.”

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.

He added: “A low carbon system means more energy security and less exposure to the rollercoaster of fossil fuel prices. These upfront costs represent an investment in stability and affordability for the long run, and that’s a message we need to keep front and centre, while not ignoring the critical issue of immediate affordability for both households and businesses alike.”

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 April.

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 21 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 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 also argued that this reform will simply serve to further complicate standing charges for consumers.