Annual bills rise £60; analysts forecast sharp price increases in January
Ofgem’s energy price cap sets the maximum amount that suppliers can charge for each unit of gas and electricity on standard variable tariffs. It covers more than 20 million households in England, Scotland and Wales and is reviewed every three months. The cap affects customers paying by direct debit, by standard credit, or by prepayment meter in slightly different ways; Northern Ireland operates a separate system.
People on variable tariffs should submit an accurate meter reading when the cap changes, and — with forecasts of significant increases ahead — prepare for a more expensive winter. Customers with working smart meters do not need to submit a reading, because their bills are calculated automatically.
Most of the increase is driven by higher wholesale gas prices. Gas bills are rising 8%, while households that do not use gas will see an increase of less than 1%. The government’s decision to remove VAT from domestic electricity bills also affected the new cap: Ofgem said the typical annual bill would have been £45 higher without that cut. Ofgem’s director general for markets, Neil Kenward, said the rise for October to December was technically 3.6%, but the regulator rounds the number it publicises — which is why the 4% figure was used.
How bills are calculated
The typical annual figure applies to dual-fuel households on a standard variable tariff that pay by direct debit. The vast majority of households pay their bill this way to help spread payments across the year. Actual bills depend on the amount of energy used and how the household pays for it. Where a household lives, the type of property it has, how energy efficient it is, how many people live there, and the weather all make a difference.
In July, Ofgem reduced what it considers a “typical” level of household energy use, citing cutbacks prompted by high prices and improved home efficiency. Its new estimate is 9,500 kWh of gas and 2,500 kWh of electricity a year. For the roughly 11 million households on fixed tariffs, the increase does not apply at all.
Standing charges
Ofgem also controls standing charges — fixed daily fees that cover the costs of connecting households to gas and electricity supplies. These vary slightly by region and payment method. Between 1 October and 31 December 2026, average standing charges for direct debit customers will be 54.83p a day for electricity and 29.68p a day for gas. The electricity charge is lower than in the previous three-month period, while the gas charge is largely unchanged.
Campaigners have long argued that standing charges are unfair because they make up a bigger proportion of the bill for low-energy households. Ofgem has said it wants all energy firms to offer at least one tariff with a low standing charge but a higher cost per unit of energy, to give some customers more choice and control. Charities, campaigners and the suppliers’ trade body criticised the proposal for shifting the cost from one part of the bill to another rather than cutting it.
Network costs
Since 1 April, charges linked to the Energy Company Obligation — the scheme that helps low-income households insulate their homes — have been scrapped from bills, and for three years renewable energy projects will be 75%-funded by general taxation instead of through a levy on energy bills. Ofgem said nearly everyone in England, Wales and Scotland would benefit, although the amounts would vary between households.
The cost of maintaining and strengthening energy network infrastructure — power lines, cables and gas pipes — is rising. In December 2025, Ofgem approved a £28bn investment to upgrade the electricity and gas grids in Great Britain, strengthen energy supplies and reduce Britain’s dependence on gas. Customers will pay part of the cost through an additional £108 added to energy bills by 2031. These charges started to appear from April 2026, adding about £6 a month to the typical household bill covered by the cap.
Fixed deals
Fixed deals provide certainty for a set period — often a year or longer — but if energy prices drop while a household is on the deal, it could be stuck at a higher price. There may also be a penalty to leave early. Experts recommend checking whole-of-market price comparison sites to help find the best deal.
Winter outlook
The next energy price cap after the October change will be set on 1 January. Analysts at the energy consultancy Cornwall Insight have forecast that domestic energy prices may rise sharply in the new year, bringing renewed concern to households during the coldest months. The picture depends considerably on international gas prices. If the conflict in the Gulf is resolved and the flow of gas through the Strait of Hormuz resumes, price rises could be restricted — but there has been little sign of a lasting truce.
Suppliers must offer customers affordable payment plans or repayment holidays if they are struggling to pay their bills, and most also offer hardship grants. Since the Russian invasion of Ukraine in 2022, bills have gone up by about 70% compared with the pre-crisis norm, and since then unpaid bills and charges have shot up.
Vanessa Northam, director at debt charity StepChange, has advice for people who may be struggling: take stock of all household money coming in and going out; look closely at how much energy is being used and be alert to estimated bills, which might prove to be inaccurate; tell the supplier if a household is likely to struggle; and, where possible, talk to someone who can fully understand the situation. Energy UK maintains a list of support schemes.
Heating oil users
Heating oil is not covered by the price cap. About 1.5 million UK households use heating oil and have already seen sharp increases in bills since the Middle East conflict triggered a jump in oil prices; some users have seen costs more than double. The issue is particularly acute in Northern Ireland, where about 500,000 homes use heating oil — almost two-thirds of all households. In March, the government announced a £53m support package to help low-income households in rural communities who use heating oil.