Household energy prices expected to rise again in October

Energy bills are forecast to rise by 4% from October, according to Cornwall Insight’s final forecast for the Default Tariff Cap (price cap). On a unit-for-unit basis, this would see bills rise to their highest level since July 2023.

Under Ofgem’s new definition of a typical consumer introduced in July 2026, the annual cap is expected to rise to £1,729, from the current £1,663. Under the previous definition, the annual cap is expected to rise to £1,941, from the current £1,862. The amount a household pays depends on their usage, with these numbers reflecting the regulator’s view of assumed annual household energy demand.

This increase is being driven by ongoing uncertainty over the US-Iran conflict, with wholesale prices for the coming winter having risen to their highest level in almost four years. The Middle East situation, and its impact on global gas markets, is affecting the ability of European gas storage operators to refill stocks ahead of winter, with gas-in-store levels remaining at historic low levels for the time of year.

This upward pressure is being compounded by the ongoing heatwave across Europe increasing gas demand for power generation to meet air conditioning and cooling demand, as well as extended Norwegian offshore production outages and strong LNG cargo demand from Asia. We have also seen small changes to Ofgem’s methodology adding further upward pressure to the forecast.

The increase comes despite the decision announced in July by the new Prime Minister that VAT would be removed from household electricity bills from October, with the wholesale market swings outweighing the VAT savings.

Cornwall Insight’s current forecast for January also points to a further rise, although – given the extent of wholesale market volatility – our view is very likely to shift many times before it is announced in November.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight, said “Rising energy bills aren’t welcome at the best of times, but with winter approaching, this latest hike will hit struggling households especially hard. Driven by international conflict rather than domestic policy, it is a stark reminder that our energy bills remain tied to events thousands of miles away.

“Moments like this are the strongest argument for reducing Britain’s reliance on volatile international gas. While temporary relief like VAT cuts help soften the blow, they don’t touch the underlying fact that Britain is heavily dependent on imports of natural gas. As long as we’re exposed to global markets, the risk of these price shocks will remain.

“While the government remains committed to delivering homegrown power, the new Energy Secretary has hinted at a more flexible approach to the clean power timeline. That reflects a genuine challenge: while greater energy independence should help protect consumers from these kinds of price rises in the future, the costs of delivering the transition are often felt hardest by those who can least afford it. The minister’s true challenge will be achieving long-term energy security without overburdening vulnerable households today.”

Default Tariff Cap Forecast	October – December (Q3 2026) Forecast (Current TDCVs)	October – December (Q3 2026) Forecast (Previous TDCVs)
Electricity	£866.63	£919.70
Gas	£862.68	£1,020.99
Total	£1,729.31	£1,940.69