Ofgem raises UK household energy price cap by 4% to £1,723 from October

Price cap increase and market drivers

Energy regulator Ofgem announced that the household energy price cap for England, Scotland and Wales will rise by 4% starting 1 October 2026. For a typical dual-fuel household paying by direct debit, the annual bill will increase by £60, or £5 a month, moving from £1,663 to £1,723. The adjustment marks the highest cap level in three years and follows a 13% increase that took effect at the beginning of July 2026. Volatility in wholesale gas prices caused by the Middle East conflict, including the six months of fighting following US-Israeli strikes on Iran in late February, served as the primary driver for the adjustment. European heatwaves also added pressure by lifting gas demand for electricity generation to power air conditioning and cooling systems.

Regulator advice and consumer impact

The new quarterly cap will remain in place from October through December 2026, coinciding with the start of the colder heating season for approximately 33 million households. Suppliers trade body Energy UK reported that wholesale gas prices over the preceding three months averaged 61% higher than in late 2025. Approximately 40% of British households are currently on fixed tariffs and will not experience price increases until their contracts expire. Neil Kenward, director general for markets at Ofgem, pointed out that consumers can find fixed deals priced £100 or more below the new October ceiling, while prepayment meter users face lower rates that save an average of £45 compared to direct debit.

High international gas prices are continuing to drive energy costs in the UK.

Government response and political debate

With the consecutive quarterly rises, a typical household will pay £350 a year more than in 2024, challenging Labour's pledge to reduce annual energy bills by £300 by 2030. In response to public inquiries on Reddit, Energy Secretary Miatta Fahnbulleh defended the government's intervention to ease household expenses through targeted fiscal relief.

As a start, we removed VAT from electricity bills to give everyone some breathing space. This is on top of the £150 we removed from energy bills in the budget in April.

Labour figures including Greater Manchester Mayor Andy Burnham have focused on cost-of-living measures, though trade unions urged further intervention. Trades Union Congress General Secretary Paul Nowak called on ministers to levy additional taxes on the profits of banks and energy companies to fund direct consumer relief.

Banks are raking it in while many up and down the country are struggling to get by - they can well afford to pay more tax to ease the pressure on working people.

Economic outlook and long-term costs

Chief economist Thomas Pugh of tax and consulting firm RSM UK stated that higher wholesale gas prices will outweigh the relief from removing VAT on electricity. RSM UK projects headline inflation to rise from 2.9% to a peak of 3.4% in November 2026, driven by utility costs, rising fertiliser expenses and food price pressures. Longer-term forecasts from retail supplier EDF suggest that bills will remain high even if wholesale markets soften, projecting a price cap of £1,786 in 2030 compared to £1,721 in the fourth quarter of 2026. Non-commodity expenses, including carbon taxes, vulnerable customer discounts and a £70bn grid transmission upgrade programme, now constitute 70% of electricity bills, leaving the wholesale portion at 30%.