- The energy price cap will rise 4% on 1 October to £1,723, adding £5 a month to average household energy bills (Energy price cap will rise by 4% from October 2026 | Ofgem)
- Gas bills will rise 8% and electricity bills will remain broadly stable, reflecting the removal of VAT on electricity bills and increased renewable generation on the system
- This is around what was expected, but the cap will be at its highest level in three years
Sarah Coles, head of personal finance at AJ Bell, comments:
“Energy bills are set to rise in October, with higher prices kicking in just as the weather turns colder. This was widely forecast, but that’s not going to make it any easier to live with.
“Another price rise was expected given that wholesale prices have risen by about 11% in the past three months in the wake of the Iran conflict. The temporary peace agreement took some of the heat out of the market, but peace has proven incredibly fragile, so energy prices have remained volatile.
“It could have been worse. The new cap reflects the fact VAT is being removed from electricity bills in October – saving about £45 a year. When added to the fact that less gas is being used to produce electricity, it means that although gas prices have risen 8%, electricity prices are broadly stable. However, higher costs will still make a nasty dent in household budgets.
“The 35% of households on fixed tariffs will still be protected from price hikes until their current deal comes to an end. However, 22 million households are still on a price cap tariff, so if you’re one of them, you could consider fixing. Some deals are charging up to £100 less than the October price cap, so you could save money immediately.
“You don’t need to fix in order to save though, because there are also discounted tariffs. These are variable, so they’ll rise when the price cap does, but they will still save you money. You can cut costs by switching to direct debit too. A typical household paying this way on the price cap will have an average annual bill of £1,663 – saving £60 a year.
“The price cap is based on average usage, so once you’ve shopped around, the best way to control bills will be to cut energy use wherever possible. After such a long period of higher prices, families will have taken all the easy energy-saving steps they can, but if you’ve let bad habits creep in during the summer, now is the time to spend more quality time with a smart meter, working out the best ways to keep your costs down.
“There’s a vast range of energy saving approaches, from home improvements to boost insulation and cut drafts, to turning the thermostat or boiler flow temperature down, turning off radiators in rooms you’re not using, only running the washing machine or dishwasher when full, or considering energy efficiency when you need new appliances.
“It’s also worth checking if you can get any help. If you have unpaid bills, you can agree an affordable payment plan with your supplier. If you’re struggling with bills now, you may be able to access grants, agree a pause in payments, or your supplier may offer you a cheaper tariff. They may be the last people you want to contact if you’re finding it hard to pay your bills, but they can help. It’s also worth checking if you qualify for any government support, including the Warm Home Discount Scheme and free insulation and boiler grants.”
