British households are set for higher energy costs this winter after the regulator Ofgem confirmed a surprise increase to the price cap, defying expert predictions of a fall.
The new cap, which takes effect on 1st January 2026, will see a 0.2% rise, pushing the average annual bill for a typical dual-fuel household paying by direct debit from £1,755 to £1,758.
Why Bills Are Rising Against Predictions
The announcement came as a shock to many. Just hours before Ofgem's confirmation, analysts at Cornwall Insight had forecast a 1% drop in the cap, citing lower wholesale gas and electricity prices.
Ofgem acknowledged that wholesale costs have fallen by 4% over the last quarter and are more stable than in recent years. However, the regulator stated the market remains "volatile," and because wholesale energy constitutes the largest portion of bills, even minor fluctuations can lead to counterintuitive outcomes.
The rise is also attributed to increased costs from government schemes. These include the expansion of the Warm Home Discount, which will support an extra 2.7 million low-income households this winter, and funding for the Sizewell C nuclear project, adding roughly £1 per month to bills.
Impact on Household Budgets
While the £3 annual increase seems small, consumer groups warn it comes at a difficult time for family finances. The rise translates to around 28p more per month for the average home.
Standing charges are also increasing, with electricity up by around 2% and gas by 3%, adding approximately 2p per day to costs.
Citizens Advice has stated this increase will mean another "tough winter" for millions of households, many of whom are already in debt to their energy supplier. The concern is compounded by expectations of a further price cap rise in April 2026.
What You Can Do
For those looking to mitigate costs, Ofgem estimates that eight million households paying by standard credit could save money by switching to direct debit.
Ministers say their focus is on expanding support for vulnerable families and investing in long-term clean energy projects to reduce costs in the future. For now, however, households are urged to prepare for higher winter energy spending.
