Energy bills for millions of households across the UK are set to increase unexpectedly from January 1, 2026, marking a tough start to the new year’s coldest months. The energy regulator, Ofgem, announced a slight 0.2% rise in the Energy Price Cap for the quarter, pushing the average typical dual-fuel bill to £1,758 a year, up from the current £1,755.
This news is a surprise, as many analysts, including experts at Cornwall Insight, had forecasted a small fall due to stable wholesale gas prices. The key driver behind this rise is the increasing cost of government policy and network levies, not wholesale price volatility.
Bills for homes with high electricity use and low/no gas use (eg, those with heat pumps or electric hobs) will see an actual rise 3% to 4% from January 1st, due to the fact that the increases are primarily driven by policy costs impacting electricity unit rates. See more on this in the table below.
Why are bills rising when wholesale prices are lower?
The change in the Energy Price Cap is primarily driven by non-wholesale costs being loaded onto customer bills. While wholesale prices for gas have actually fallen, the regulator has increased the unit rate for electricity to cover these rising levies.
What is the Energy Price Cap?
The Energy Price Cap is set by the UK’s energy regulator, Ofgem, which limits the maximum amount that energy suppliers in England, Scotland, and Wales can charge households for each unit of gas and electricity they use, as well as the maximum daily standing charge. It applies to customers on standard variable tariffs (SVTs) or default tariffs, which are the majority of households not on a fixed deal, and is designed to protect consumers from being overcharged.
What is the new Price Cap?
| %Change (Jan–Mar 2026 vs. Oct–Dec 2025) | Impact on annual bills | Primary reason | |
|---|---|---|---|
| Energy price cap | Up 0.2% | £3 Increase (to £1,758) | Government Policy & Network Costs |
| Electricity unit rate | Up 5.1% (to 27.69p/kWh) | Rises for High Electricity Users | Policy costs (Warm Home Discount, Nuclear RAB Levy) |
| Gas unit rate | Down 5.7% (to 5.93p/kWh) | Falls for High Gas Users | Falling wholesale gas prices |
| Electricity standing charge | Up 2% (to 54.75p/day) | N/A | Operating Costs |
| Gas standing charge | Up 3.1% (to 35.09p/day) | N/A | Operating Costs |
What can households do to save on energy?
With bills remaining about 50% higher than pre-Russia invasion levels, and predictions suggesting a further 4-5% rise in April 2026 due to increasing policy costs, proactive measures are essential:
Look for a fixed deal
The single best step for most households is to move off the Price Cap and find a fixed tariff. The cheapest year-long standalone fixes are currently around 10% less than the new January Cap. Find a fixed deal here
Optimise energy use
Use smart thermostat settings to make sure you’re not using more energy than you need, turn down the heating by a degree, and regularly service your boilers/ heating system so they are working as efficiently as possible. If you have an electric vehicle (EV) or use energy at off-peak hours, you can save on your energy bills significantly by looking for special tariffs.
If you’re moving home…
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Calls for government intervention
This rise puts pressure on the Chancellor, Rachel Reeves, ahead of next week’s Budget (26 November 2025) to introduce measures to help tackle the “crippling levels of household energy debt” (£4.4bn across the UK). The Chancellor is reportedly considering eliminating the 5% VAT charge on electricity bills, a move that could cut about £80 million from January’s bill. Consumer groups are calling for a social tariff to be introduced for vulnerable customers, arguing the current Price Cap is too expensive to truly protect customers.
The future of energy costs relies heavily on government policy choices, which are expected to keep adding pressure to bills until the mid-2030s.
