Will energy prices rise further in 2026?
The Ofgem price cap rose by 13% on 1 July. With wholesale energy prices so unsettled, could energy bills increase further?
Energy bills are on the rise, with wholesale prices in flux due to conflict in the Middle East.
Tensions between the US and Iran have kept crude oil prices volatile since the end of February, largely because of the ongoing disruption in the Strait of Hormuz.
Despite moves from the new prime minister Andy Burnham to cut VAT on electricity bills for households from October, prices are still set to rise this autumn.
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Experts at Cornwall Insight are forecasting Ofgem’s price cap will go up by 4% on 1 October – and bills could rise further in 2027.
Where are energy prices now?
Under Ofgem’s new definition of a typical household, which states the typical household uses 2,500 kilowatts each year in electricity and 9,500 kilowatts each year in gas, average annual energy bills rose to £1,663 on 1 July, a 13% rise from the April price cap.
As Ofgem calculates the price cap by observing where wholesale prices go in a three-month period and calculating the average, the volatility of the markets made domestic energy bills rise significantly.
The price cap is a cap on unit rates and daily standing charges, so you may pay more or less, depending on your energy usage. The price cap also varies by region and applies to those on standard variable tariffs.
If you are on a fixed-rate tariff, the price cap does not affect you.
Where will energy prices go in autumn?
Energy prices are expected to rise by a further 4% in the autumn, again due to volatility in the wholesale market caused by the Middle East conflict.
In its final forecast on 19 August, Cornwall Insight, an energy consultancy well-regarded for the accuracy of its price cap forecasts, said energy bills will hit a three-year high on 1 October, based on unit prices.
It is forecasting the annual price cap to rise to £1,729, from £1,663.
The consultancy firm said wholesale energy prices had risen to their highest level in nearly four years, with European gas storage operators unable to refill stocks ahead of winter.
It said this upward pressure was being compounded by heatwave conditions across Europe, which had increased the demand from households and businesses for air conditioning, as well as production outages at Norwegian offshore gas production facilities and strong liquefied natural gas (LNG) demand from Asia.
The 4% increase is forecast to come despite prime minister Andy Burnham’s decision to cut VAT on electricity bills from 5% to 0% from 1 October, saving the average household £45 a year on their bills. Cornwall Insight said the wholesale energy market swings will outweigh the VAT savings.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Moments like this are the strongest argument for reducing Britain’s reliance on volatile international gas.
“While temporary relief like VAT cuts help soften the blow, they don’t touch the underlying fact that Britain is heavily dependent on imports of natural gas. As long as we're exposed to global markets, the risk of these price shocks will remain.”
Energy regulator Ofgem will announce the price cap covering the October to December period by 26 August.
Cornwall Insight forecasts on 19 August also suggest the price cap will rise again on 1 January 2027, but it said its view “is very likely to shift many times” before Ofgem’s official announcement, given how volatile the wholesale market is. Ofgem is expected to announce the January to March price cap in November.
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 select households money to cover 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.
