Millions of households across Britain are set to see their energy costs edge upwards once again at the start of 2026, following the latest announcement from the industry regulator. Ofgem has confirmed it will raise its energy price cap for the first quarter of the new year, marking another increase for consumers already grappling with the cost of living.
The New Price Cap Figures Explained
The regulator for England, Wales, and Scotland has set the new cap at £1,758 per year for a typical dual-fuel household paying by direct debit. This cap will be in effect from January 1 to March 31, 2026.
While this represents a modest 0.2% increase from the £1,755 cap that was in place between October and December 2025, it is notably £20 higher than the level that applied in the first three months of 2025. The cap dictates the maximum amount suppliers can charge per unit of energy and for standing charges on default or variable tariffs.
Regulator Advice and Government Intervention
Ofgem's Director General for Markets, Tim Jarvis, acknowledged the ongoing pressure on household budgets. "While energy prices have fallen in real terms over the past two years, we know people may not be feeling it in their pockets," he stated last month.
Jarvis emphasised that the price cap acts as a "safety net" but urged consumers to explore ways to reduce their costs. His advice includes:
- Comparing different tariffs to find the best deal.
- Switching to paying by Direct Debit or smart pay-as-you-go.
- Noting that prepayment remains the cheapest method, saving customers around £47 on average.
In a move to offset some of the financial strain, the UK Government used the Autumn Budget to pledge support. It announced measures aimed at taking 'around £150 off energy bills on average from April' 2026.
This reduction will be achieved by ending the Energy Company Obligation scheme's bill-funded element and having the government cover 75% of the domestic cost of the legacy Renewables Obligation for three years. Furthermore, the £150 Warm Home Discount will be extended to an additional 3 million of the poorest households.
What the Future Holds for Energy Costs
Following the Budget announcement, Martin Lewis of MoneySavingExpert projected that the government's actions could lead to significant reductions from April 2026. He forecasted a potential 3.5p/kWh cut in electricity and a 0.35p/kWh cut in gas (including VAT), equating to a 13% reduction in electricity and a 6% reduction in gas compared to the January cap level.
Minister for Energy Consumers, Martin McCluskey, commented: “We know the affordability crisis is the biggest issue facing this country... The only way to bring down bills for good and protect our energy security is to get Britain off the rollercoaster of fossil fuels and onto clean, homegrown power we control.”
An Ofgem spokesperson welcomed the government's intervention, stating: "We support any move that reduces pressure on energy bills... We will continue working with government and suppliers on how these savings can be passed on to households on fixed deals."
It is crucial for consumers to remember that the published £1,758 figure is an estimate for typical use. Your final bill depends entirely on your actual energy consumption, as well as your location, meter type, and payment method. Ofgem advises anyone struggling to pay their bill to contact their supplier immediately to discuss options such as repayment plans.
