British Gas, Octopus Energy, and EDF customers have received a significant price update from Ofgem's interim director general of markets, Neil Kenward. Speaking on the Making Money podcast, Kenward offered a forecast on the future trajectory of energy costs, suggesting that bills may not return to levels seen before the Covid-19 pandemic and the Russia-Ukraine war.
Energy Costs Have Risen Dramatically Since 2021
Energy costs in the UK surged from 2021 onwards as global economies reopened and demand skyrocketed following the Coronavirus crisis. The situation was exacerbated by Russia's invasion of Ukraine, which led many nations to stop purchasing Russian energy. The Ofgem price cap, which governs what most households pay for energy, has increased by almost 50% compared to pre-crisis levels in 2019.
Kenward's Forecast on Bill Reductions
When asked whether energy costs could fall to pre-pandemic levels, Kenward stated: "There is scope to bring UK energy bills down over time, and we can see that with low carbon power potentially gets cheaper as we might hope in time. And we can get that more efficient system with more flexibility, etc." However, he added: "I think I'd be surprised if we can get energy bills back down to where they were." Kenward noted that in real terms, the increase is about 15%, as people's incomes have also risen. He emphasized that energy bills remain a "huge affordability challenge" and that Ofgem can help by regulating the system to keep costs low, but ultimately government interventions like the Warm Home Discount are needed to assist struggling households.
Recent Price Cap Changes and Impact of Iran Strikes
In July 2026, UK energy costs increased by 13% due to the US war with Iran. Prior to the US and Israeli strikes on Iran, prices had been declining; the price cap in April 2027 actually saw a 7% drop. The government also cut £150 from many bills through measures introduced in the Budget. The independent Resolution Foundation had forecast that bills in 2026 would be £200 lower in real terms than in 2024, but that projection was made before the strikes on Iran. Iran's retaliatory strikes on various Gulf states disrupted international energy supply and drove inflation higher. Many analysts believe prices will continue to rise when the next price cap takes effect in October.
Government and Regulatory Actions
Kenward highlighted that the government has a role in addressing affordability through programs like the Warm Home Discount. The DWP has also confirmed £300 for heating bills for older state pensioners. As energy costs remain a pressing issue for millions of households, the regulator and government continue to explore ways to mitigate the financial burden.
