Energy bills to rise £60 a year from 1 October 2026
Energy bills will increase by £60 a year for millions of households, Ofgem has announced. This marks the highest prices we’ve seen in three years.
This morning, Ofgem, the energy regulator, announced the energy price would rise by 4% from 1 October 2026 compared to the current level, with households using a typical amount of gas and electricity expected to see their bills rise from £1,663 to £1,723.
I spoke to energy experts to ask what the impact of the August price cap will be on UK households, and how to save energy at home.
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The August price cap announcement
Ofgem says the price rise is driven by the rise in the wholesale cost of gas, which is what suppliers pay, as a result of ongoing conflict in the Middle East.
The increase is expected to impact 22 million households in the UK who are protected by the price cap. The price cap refers to a default tariff which is applied to those who are not on a fixed-rate tariff. Ofgem sets the price cap and reviews it every three months to reflect wholesale energy prices. If you have fixed your tariff, you will not be affected by the August price cap unless your tariff runs out.
(Image credit: Future PLC/David Brittain)
‘One thing that is important to understand is that this is the first price cap announcement based on Ofgem’s updated Typical Domestic Consumption Values, which estimate average household energy use,’ explains Gareth Kloet, energy expert at Go.Compare Energy. ‘Because those benchmark consumption levels have fallen, the headline cap figure may not tell the full story for individual households. And the price cap isn’t a limit on what you’ll pay, but is based on average household energy use. It’s a key reminder for billpayers to look closely at the unit rates and standing charges on their tariff, rather than relying on the headline number alone.’
‘This is also the first price cap with the Government’s temporary removal of VAT on domestic electricity bills in place, which should offer some support over the winter. But again, it may make the new cap harder to compare with previous announcements, because the October rates will be calculated differently for the six-month period.’
In July, the Government announced that VAT would be cut from household electricity bills as of 1 October, offering savings of around £45 per year. Ofgem says the VAT reduction means electricity bills will remain broadly stable, with most of the increase in the price cap driven by higher gas costs.
‘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,’ Neil Kenward, Ofgem’s Director General for Markets, said.
How to save money on your energy bills
If you’re looking to save money in light of this announcement, consider fixing your tariff before the price cap comes into effect.
‘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,’ says Neil.
(Image credit: Future PLC/Caroline Mardon)
Gareth also says the main action to take is reviewing your current tariff. But he also recommends shopping around to get the best deal.
‘Those who value certainty may want to explore fixed-rate options, which fixes the rate you pay for your energy for a set length of time. Those on a standard variable tariff should keep a close eye on future price movements, as energy providers can change the rates they charge. It’s also worth comparing tariffs regularly, as the cheapest option isn’t always the best fit for every household,’ he says.
‘If you’re concerned about higher bills, small changes can still make a meaningful difference. Checking your heating timer, draught-proofing windows and doors, and avoiding unnecessary energy use can all help keep costs under control during the colder months. Anyone struggling to keep up with payments should contact their supplier as soon as possible, as support may be available and it’s always better to seek help early rather than let debt build up.’
If you find yourself worried about paying your bills, reach out to your supplier to see what support they can offer. You can also speak to independent bodies such as Citizens Advice, which can also offer support.
