Energy price cap forecasted to fall

Cornwall Insight has released its final forecast for the April – June 2026 which predicts the cap will fall by £117 to £1,641 a year for a typical dual fuel household. This would represent a decrease of 7% from the current price cap, which is set at £1,758 per year.

The main driver behind the decrease is the policy measures announced in the November 2025 Budget. These include the shifting of 75% of the Renewables Obligation (RO) costs from household energy bills into general taxation, and the decision not to extend the Energy Company Obligation (ECO) beyond March 2026. Together, these changes reduce the cap by approximately £145 per year for a typical consumer once VAT and pricing allowances within the cap methodology are taken into account.

Increases in the charges associated with the operation and maintenance of the country’s energy networks have offset part of these savings.

Wholesale gas and electricity prices for the cap period have risen slightly since the December Q226 forecast, with gas prices in particular having been volatile since the start of 2026 due to geopolitical factors. Despite this rise, the comparatively lower prices seen in the final weeks of 2025 mean the wholesale cost element of the cap is still down compared with the January cap.

After two consecutive quarter-on-quarter increases in the cap, the anticipated decline is welcome news. The same cannot be said for non-domestic bills, with network increases also impacting businesses; however, unlike households, many business energy users have not received equivalent policy relief. As highlighted in our Business Energy Costs Forecasts, costs are continuing to trend upwards, reflecting this lack of protection.

Looking ahead, we currently expect the price cap to remain relatively steady throughout 2026, with a small fall forecast in July. These predictions may shift as wholesale markets change and potential policy cost announcements happen.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said “Any reduction in bills is positive, easing pressure at a time when affordability really matters. It’s the drop in policy costs, as a result of Government interventions, that are doing most of the heavy lifting and, while wholesale costs have come back into the headlines in recent weeks, the impact on April’s bills is minimal.

“The real test will be keeping those savings going. That won’t be easy as the UK continues to upgrade its networks and infrastructure. That investment is needed if we want an energy system that is more secure and resilient with the consequences of exposure to global energy markets having been made all too apparent in recent years. However, there needs to be an open conversation about the fact that such a transition will not be cost‑free.

“The most important thing is transparency – being open with people about why these changes are happening and how they fit into a longer-term plan. Bills aren’t going to drop by hundreds of pounds overnight, but long-term progress is possible if we stick with the transition. Ultimately a move to homegrown energy gives us a stronger chance of eventually achieving price stability, while providing greater energy security in the process.”

Cornwall Insight’s Default Tariff Cap forecast, Per Unit Costs and Standing Charge (dual fuel, direct debit customer)