Energy regulator Ofgem has announced a 4% increase of the energy price cap for the period covering 1 October to 31 December 2026.
The energy price cap protects around 22 million households on default tariffs by limiting the maximum rates and standing charges that energy suppliers can charge. It is updated every three months to reflect changes in the underlying costs of supplying energy.
The current price cap for a typical household paying by direct debit for gas and electricity is £1,663. Based on the energy use of a typical domestic household, from October, the price cap will rise by £60 per year (or £5 per month) to £1,723 for the average household using both electricity and gas if this level was sustained for a year. Around 35% of households are on fixed tariffs and will not be affected by this rise- this is about 11 million households.
OFGEM says the increase reflects higher wholesale gas prices as a result of the ongoing conflict in the Middle East, with volatile global gas markets remaining the dominant driver of price changes.
However, prices remain 52% below the height of the energy crisis in 2022 when the government stepped in to cap bills at £2,500.
The Government’s decision to remove VAT from all domestic electricity bills is reflected in this update. While higher wholesale prices are pushing up both gas and electricity costs, the VAT reduction means electricity bills will remain broadly stable. As a result, most of the increase in the price cap is driven by higher gas costs, with gas bills rising by 8%, meaning that households which do not use gas will see a much smaller increase of less than 1%.
Without the Government’s intervention on VAT, this figure would have been around £45 higher. The VAT removal also benefits customers currently on fixed tariffs, with the discount automatically applied by suppliers.
Neil Kenward, Ofgem’s Director General for Markets, 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.
“Savings are available by choosing a fixed tariff, which are available at £100 or more below the October price cap, and many suppliers offer tariffs with cheaper electricity to smart meter customers for electricity consumed out of peak times. It’s also worth considering different payment methods, with prepayment customers paying the lowest price cap rates, and could save consumers an average of about £45 compared to direct debit.”
Ofgem urges anyone struggling with their bills to reach out to their energy supplier as soon as possible in the first instance. Suppliers should support customers to agree affordable repayment plans which can help households regain control and avoid falling further behind and offer routes to financial assistance and advice.
The case for Solar and Storage
The news comes as home solar panel installations hit a record high in the first six months of 2026. MCS data shows that 102,521 installs were carried out between January-June.
Paul Atherton, Managing Director of Project Solar, said:
“It is ironic that another increase to energy bills has been announced after a summer of record-breaking temperatures and sunshine.
“The future of renewable energy is quite literally staring us in the face while households are left worrying about how to pay for fossil fuels.
“For some, an additional £60 per year will be unaffordable. For millions more, the rise will be manageable but frustrating.
“In previous times of instability, we have seen demand for home solar panels rise dramatically, and we predict the current global climate mixed with warmer weather at home will make this year another record-breaker for home solar installations.
“Our data shows most solar panel owners save £86 per month in the first year, translating to an annual saving of £1,032.”
The Spark Gap
“The news that Ofgem is raising the energy price cap by 4% is unsurprising but makes depressing reading for people thinking about heating their homes this winter.
