Will energy prices rise further in 2026?
The Ofgem price cap will rise by 4% on 1 October as the Iran war is continuing to push up wholesale prices. What will happen to energy bills next?
Energy bills are set to increase for millions of people again this autumn after energy regulator Ofgem confirmed the price cap will rise by 4% on 1 October.
It means the average annual energy bill for the typical dual-fuel household in the UK paying by direct debit will rise by £60 from £1,663 to £1,723 per year between October to January.
The price hike will affect the 22 million households on a standard variable tariff (SVT), but 11 million households on fixed rate energy tariffs will not see a change to the unit rates they pay.
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Ofgem said the driving factor behind the higher price cap was the increased wholesale cost of gas caused by the US-Iran war, which has disrupted oil and energy supply lines since 28 February.
The October price cap also reflects prime minister Andy Burnham’s decision to remove VAT from domestic electricity bills from October to at least April, with Ofgem saying the tax cut will save around £45 per year for the average dual-fuel household.
While higher wholesale prices are pushing up energy costs, the VAT cut means the October price cap rise is mostly driven by gas costs, which are 8% higher than in the July to September period. Households that only use electricity will see their bills rise by less than 1%, according to Ofgem.
Neil Kenward, director general for markets at Ofgem, said: “High international gas prices are continuing to drive energy costs in the UK. We welcome the government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter.”
What is the price cap?
The price cap determines the maximum unit rates and daily standing charges your energy provider can charge you. As it is a limit on unit rates, if you use more energy, your bills would be higher than the average – likewise if you use less, they could be lower. It also varies by region.
The current price cap is £1,663 for the period between July and September, a 13% rise from the previous April price cap.
This headline figure is calculated by taking the average amount of energy used by the typical household and applying the unit rates and standing charges.
In July, Ofgem changed their definition of a ‘typical household’ to one that uses 2,500 kilowatts each year in electricity and 9,500 kilowatts each year in gas.
Where will energy prices go next?
The energy price cap will rise by 4% in the autumn, due to the volatility in the energy markets. This was in line with the expectations of forecasters.
However, as the Iran war is still ongoing and the global supply of oil and wholesale energy is still disrupted, energy prices are set to continue climbing, according to experts.
Cornwall Insight, an energy consultancy well-regarded for the accuracy of their price cap forecasts, expects the price cap to rise by a further 9% in January, bringing the average annual bill to £1,872 at the start of 2027.
If the forecast turns out to be accurate, it would mean the average annual energy bill would be £149 higher in the winter than in the autumn.
The January 2027 price cap will be officially confirmed by Ofgem by 25 November.
Craig Lowrey, principal consultant at Cornwall Insight: “Households will see rising energy bills going into winter, with the risk that unfortunately January will bring even more hardship.
“What is frustrating is these rises, as we have seen time and time again, have very little to do with what is happening in Britain. The market is reacting to events thousands of miles away, and low European gas stock levels that were already tight even before the heatwave. It certainly makes a case for reducing our reliance on the volatile gas markets.”
Lowrey added that where bills go next depends on whether the Iran war will calm down in the coming months, but warned that even if the conflict ends, bills are still unlikely to fall from October’s level.
Will the government step in to lower energy bills?
The government has already stepped in twice this year to help lower energy bills. In April, some green levies were scrapped from energy bills, helping to bring prices down and from October VAT will be removed from electricity bills.
But with prices still rising despite these interventions, some are calling for the government to do more.
Lowrey at Cornwall Insight said: “Households who will feel the bill rises most are those who can least afford it, and it is vital that any support reaches the most vulnerable first. That's why the Autumn Budget matters so much. Households need to know what kind of support, if any, is coming, and when, so they can plan for the cold months ahead.”
In an interview with BBC Radio 4 on 26 August, new energy secretary Miatta Fahnbulleh said the government is “trying to do everything that [they] can” to help households with the increased cost of energy.
She pointed to the decision to remove VAT, but did not say whether the government will introduce additional measures to help households.
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.
Additionally, 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.
