As we head into 2026, many UK households are facing a confusing reality: headlines mention falling wholesale energy costs, yet monthly bills are set to rise from January. If the cost of buying energy is going down, why are households being asked to pay more?
The answer lies in the complex makeup of your energy bill – specifically the tug-of-war between “unit rates” and “energy standing charges“.
Here is everything you need to know about the changes coming this winter, and what they mean for your wallet.
What is the Energy Price Cap?
The Energy Price Cap is set by the regulator, Ofgem, on the maximum amount energy suppliers can charge for each unit of gas and electricity. It also limits the daily standing charge. It’s not a cap on your total energy bill, but an estimate – the headline figure you often see (eg, £1,758 from January 2026) is calculated for a “typical” household using average amounts of energy. If you use more than the average user, you will pay more.
From January 1, 2026, the price cap will rise to £1,758 per year for a typical dual-fuel household paying by Direct Debit. While this seems like a small increase, it comes at a time when usage is highest.
Read more: Surprise energy bill rise – what it means for your bills from January
What are unit rates?
Unit rates are the prices you pay for every kilowatt-hour (kWh) of energy you actually use. This is the part of the bill you can control by turning off lights or lowering the thermostat.
For the period of January to March 2026, the average unit rates are:
| Energy type | Current Rate | Change |
|---|---|---|
| Gas | 5.93p per kWh | (down from 6.29p compared to the previous price cap) |
| Electricity | 27.69p per kWh | (up slightly from 26.35p compared to the previous price cap) |
As shown in the table above, gas unit rates are actually dropping, reflecting the lower wholesale cost of gas.
What are standing charges?
The standing charge is a fixed daily fee you pay to your energy supplier just to be connected to the grid. You pay this amount every single day, regardless of whether you use any energy at all.
For January to March 2026, average standing charges are increasing:
| Energy type | Daily Standing Charge |
|---|---|
| Gas | 35.09p per day |
| Electricity | 54.75p per day |
The standing charge will increase for most customers on a variable tariff. This means a typical household will pay over £300 a year in fixed charges before even switching on a light.
Why are wholesale energy prices going down?
“Wholesale price” refers to the cost suppliers pay to buy gas and electricity from the market. These prices have fallen significantly from the record peaks of the energy crisis, largely due to:
- Stabilising global gas markets
- Healthy gas storage levels across Europe
- Increased renewable energy generation reduces the reliance on expensive gas power plants
This drop in wholesale costs is the main reason why the gas unit rate is falling. However, these savings are being eroded by other rising costs.
Why are energy bills going up?
While unit rates may be lower than historical peaks, overall energy bills can still rise due to increases in fixed daily standing charges, non-wholesale costs (network and policy levies), and simply using more energy.
Why are energy standing charges going up?
If energy is cheaper to buy, why is the daily fee to access it getting more expensive? There are several driving factors:
Grid Maintenance & Upgrades
The cost of maintaining the pipes and wires that deliver energy to your home is increasing. In addition, as the UK transitions to green energy, significant investment is needed to upgrade the grid.
Supplier Failures (SOLR Costs)
When energy suppliers go bust (as many did in 2021/22), their customers are moved to a new supplier. The cost of this process is recovered through energy standing charges on everyone’s bills.
Nuclear RAB Levy
To help fund the next generation of nuclear power energy development, a new levy has been added to bills to help fund new nuclear power stations, such as Sizewell C plant in Suffolk, which will add around £1 per month to the average household.
Policy costs
The cost of social schemes, such as the Warm Home Discount, is levied on energy bills. Recent expansions to the scheme are partly funded by an increase in standing charges.
Levelisation
Historically, customers using prepayment meters faced higher energy standing charges to cover the higher costs suppliers incurred to service them. Regulatory changes have been introduced to ensure Prepayment Meter customers don’t pay more for standing charges than Direct Debit customers. To balance this, Direct Debit standing charges have risen slightly to subsidise the difference
What this means for bills
For the average user, the drop in gas unit rates roughly cancels out the rise in electricity rates and standing charges, resulting in a fairly flat or slightly increased total bill. However, because we use more energy in winter, the timing of the January rise will be felt acutely.
Higher energy standing charges may affect low-energy users more:
- Single-person households and those in well-insulated homes effectively pay a higher “average price” per unit because the fixed standing charge makes up a larger percentage of their total bill
- Households that try to save money by drastically cutting usage will find their savings limited by the unavoidable daily fees
Looking ahead, analysts predict the cap could fall (potentially by around 5%) as lower wholesale costs finally filter through to the calculation period for the spring cap. Government policies and budget decisions will also play a key role in how these costs evolve throughout the year.
Long-term forecasts remain uncertain and depend heavily on global geopolitical stability and weather conditions.
Read more: What does the 2026 Budget mean for UK household bills?
