Energy bills have risen for millions of households as the Ofgem energy price cap increased by 4% on October 1.
The new price cap brings the average annual energy bill for the typical dual-fuel UK household paying by direct debit to £1,723 a year, up from £1,663 in the previous three-month price cap period.
The bill hike affects the 22 million households on a standard variable tariff (SVT), while the 11 million households on fixed rate energy tariffs will not see a change to the unit rates they pay.
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Ofgem says the October rise was caused by the increased wholesale cost of gas resulting from the US-Iran war, which has disrupted oil and energy supply lines since 28 February.
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With the war continuing to cause disruption, experts have warned that energy bills will continue to rise and force the next price cap up by 16% in January 2027.
What is the price cap?
The price cap determines the maximum unit rates and daily standing charges your energy provider can charge you.
The current price cap is £1,723 for the period between October and December, 4% higher than the previous July price cap.
This headline figure is calculated by taking the average amount of energy used by the typical household and applying the new cap’s average unit rates and standing charges. Since July, Ofgem has said the ‘typical household’ is one that uses 2,500 kilowatts of electricity and 9,500 kilowatts of gas a year.
As the price cap is a limit on unit rates, your household’s energy bill can be higher or lower than the headline figure depending on your personal energy usage. The price cap also varies by region.
Where will energy prices go next?
Experts say the price cap is likely to keep rising as the Iran war continues to disrupt markets and push energy bills up for households in the UK.
The January 2027 price cap will be officially confirmed by Ofgem by 25 November, however Cornwall Insight, an energy consultancy well-regarded for the accuracy of their price cap predictions, expects it to rise by a further 16%, bringing the average annual bill to £1,999.
If the forecast turns out to be accurate, it would mean the average annual energy bill would be £276 higher in January than in October.
Cornwall Insight said the substantial increase is largely driven by conflict in the Middle East which has disrupted the gas supplies to the UK and the rest of the world.
Craig Lowrey, principal consultant at Cornwall Insight, said: “These prices are going to hit households hard. January is already a difficult month for many, with cold weather and bank balances still recovering from Christmas, and now they face the biggest price cap rise we've seen in four years. At the moment, we can't yet see an end to the volatility, and with gas stocks as low as they are, the effects of the conflict could be with us for many more months.”
Most forecasters agree that bills will rise in January, and some expect an even more dramatic rise than the one expected by Cornwall Insight. Analysts at Bloomberg Economics believe the price cap could rise as much as 25% in the first three months of next year, pushing energy bills up to £2,150 a year.
Meanwhile, the latest forecasts from energy firm EDF say energy bills could surge by over 20% between October and January, bringing the average bill up to £2,076.
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. In October, VAT was removed from electricity bills.
But with prices still rising despite these interventions, some are calling for the government to do more to help struggling households.
Lowrey at Cornwall Insight said: “With the Budget just around the corner, there is the possibility of further household support beyond the VAT move announced in July. However, the Government is going to have to think carefully about the type and level of support that they make available.”
The trade body for the energy industry, Energy UK, has also called on the government to introduce a more targeted support scheme for households struggling with their energy bills.
In an interview with the BBC’s Laura Kuenssberg on 27 September, prime minister Andy Burnham signalled that the government was looking at potential energy bill support for households, but did not confirm what this would look like.
He said: “[The Middle East conflict] has had an impact on people's energy costs, and we will now have to deal with that and support people as best we can through the budget. And we will do those things, but in a way that is highly prudent with the running of the UK economy.”
New energy secretary Miatta Fahnbulleh has also previously signalled the government could step in, saying in an interview with BBC Radio 4 on 26 August: “[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.
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.
