Ofgem Raises Energy Price Cap to Three-Year High
Ofgem is increasing the household energy price cap by 4% on October 1, raising typical annual bills to £1,723 amid volatile global gas markets.
The energy regulator Ofgem is raising the household energy price cap by 4% on October 1, increasing the typical annual bill for dual-fuel households to £1,723. This adjustment brings energy costs to a three-year high, driven primarily by volatile wholesale gas prices linked to conflict in the Middle East and the war in Iran. Gas unit rates are expected to rise by approximately 8.7%, while electricity costs remain relatively stable due to government intervention.
To mitigate the hike, the Government of the United Kingdom removed VAT from domestic electricity bills for six months, a move expected to save households roughly £45. The government also provided a £150 warm home discount to six million households. Despite these measures, opposition leaders and debt charities have criticized the response as insufficient. Energy UK warned that domestic energy debt could reach £7 billion by the end of 2026, while the Trades Union Congress called for windfall taxes on bank and energy company profits to fund a social tariff.
Consumer experts and the comparison site Uswitch have urged the four million households without smart meters to submit meter readings by October 1 to avoid incorrect billing. Analysts from Cornwall Insight and other firms warn of further volatility, with some forecasting a price jump of up to 23% in January 2027, potentially pushing annual bills above £2,100. Experts recommend that households on standard variable tariffs consider locking in fixed-rate deals to avoid future shocks.
