Energy bills are increasing slightly starting today as the new Ofgem price cap takes effect. For households that pay via direct debit, the annual energy bill will rise from £1,755 to £1,758. The price cap governs the maximum charges for gas and electricity unit rates, along with standing charges.
Notably, the price cap does not impose a total limit on energy expenses, meaning the final bill still hinges on actual energy consumption for those not on a fixed tariff. Individuals using pre-payment meters will see their price cap rise from £1,707 annually to £1,711, while those on receipt of bills will experience an increase from £1,890 to £1,894 per year.
The price cap undergoes adjustments every three months, with the next revision scheduled for April 2026. Despite the new price cap being 2% or £37 lower than the previous period, households continue to face elevated energy costs. Consumer advocate Which? advises consumers to explore fixed tariffs to save money.
According to Which? energy editor Emily Seymour, considering the upcoming winter months and the slight price cap hike in the new year, households should look into lower-priced deals in the market. It is recommended to opt for deals cheaper than the current price cap, with durations not exceeding 12 months and minimal exit fees.
Ofgem attributes the latest price cap increase to government policy costs and operational expenses, which include funding initiatives like the Sizewell C nuclear project and the Warm Home Discount scheme. Chancellor Rachel Reeves announced in the November Budget that households can expect an average annual energy bill reduction of £150 from April 2026 by eliminating certain green levies.
The Energy Company Obligation (ECO) is set to conclude in March 2026, and the financial burden on households for the Renewables Obligation (RO) scheme will be lessened. Most energy providers have indicated that fixed tariff users will benefit from the anticipated savings. Energy experts at Cornwall Insight project a drop in the price cap to £1,620 come April 2026, equating to a £138 reduction.
