Millions of households across Britain will see a slight increase in their energy costs from today, as the latest quarterly price cap from regulator Ofgem takes effect.
What the New Price Cap Means for Your Bills
The change, which began on 1 January 2026, means the typical annual bill for a household paying by direct debit rises by £3, from £1,755 to £1,758. It is crucial to understand that the cap limits the unit rates for gas and electricity, plus the daily standing charges, but does not set an absolute maximum on your total bill. Your final cost remains dependent on your actual consumption.
For customers using alternative payment methods, the changes are similarly modest. Those on a pre-payment meter will see their annual cap rise from £1,707 to £1,711. Households that pay upon receipt of their bill face an increase from £1,890 to £1,894 per year.
Should You Fix Your Energy Tariff Now?
With the price cap set to be updated again in April 2026, consumer champion Which? is urging bill-payers to consider their options. Emily Seymour, Energy Editor at Which?, highlighted the timing: “As we head into the coldest months of the year, many households will be concerned that the energy price cap will increase slightly in the new year.”
She advised proactive shopping around, stating: “There are several deals on the market for lower than the price cap so now is a good time to shop around if you’re looking to fix. As a rule of thumb, we’d recommend looking for deals cheaper than the current price cap, not longer than 12 months and without significant exit fees.”
This advice comes despite the new cap being approximately 2% or £37 lower than the equivalent period last year, a reminder that energy costs remain historically high for UK consumers.
Policy Impacts and Future Forecasts
Ofgem attributed the small increase to rising government policy and operating costs. These include funding for major projects like the Sizewell C nuclear plant and social schemes such as the Warm Home Discount.
Looking ahead, Chancellor Rachel Reeves announced in her November Budget that households should see an average annual cut of £150 from April 2026. This will be achieved by removing certain green levies, coinciding with the end of the Energy Company Obligation (ECO) scheme in March 2026 and a reduction in the Renewables Obligation (RO) charge.
Most energy suppliers have confirmed that customers on fixed tariffs will still benefit from these future savings. Meanwhile, analysts at Cornwall Insight predict a more substantial drop in the price cap by spring, forecasting it will fall to around £1,620 in April 2026—a potential reduction of £138 from the new January level.
