Ofgem Price Cap Rises by 13%
The Ofgem energy price cap rises to £1,862 per year from July 1, a 13% increase from the previous £1,641 cap. The rise is driven by US-Israeli strikes on Iran and the closure of the Strait of Hormuz, along with strikes on Gulf states.
Despite a June memorandum of understanding largely ending hostilities between the US and Iran, experts say struggling Britons should not expect immediate relief in energy bills.
Cornwall Insight Forecasts Minimal Reduction
Cornwall Insight, an energy data analysis firm, forecasts only a 0.5% reduction in the October price cap compared to July. A spokesperson said: “Our forecasts have eased slightly since May, with the US-Iran 60-day ceasefire, along with ongoing negotiations, helping to stabilise wholesale gas markets. However, conflicting reports on the reopening of the Strait of Hormuz, the patchy progress of peace talks, and uncertain repair timelines to key regional infrastructure mean prices remain high, if less volatile than in the Spring.”
Simon Francis, coordinator of the End Fuel Poverty Coalition, emphasised that the only route to lower bills is a combination of renewable energy and more energy-efficient homes. He said: “Cornwall Insight's forecast of a small fall in October offers little comfort. It is also entirely predicated on a fragile ceasefire with households remaining exposed to the volatility of fossil fuel prices, while the energy industry continues to profit.”
Rejecting North Sea Licences
Francis dismissed the idea of new North Sea licences as a solution. “The price shock profiteers will try to tell you the answer is new North Sea licences. It is not: around 90% of commercially viable North Sea gas has already been extracted, and what remains is sold at global market prices. The only credible path off the gas price rollercoaster is homegrown renewables, better energy efficiency for buildings and accessible heat pumps for every household, a reality with little recognition in Andy Burnham's speech in Manchester yesterday.”
Francis urged the government to act before September, stating: “The Government cannot wait until September to act, and the next Prime Minister inherits that same urgency. If it is to be Andy Burnham's vision of a rewired Britain, then the new PM must also rewire how energy bills are set, with a permanent social tariff, an end to energy debt and a credible plan to bring down electricity prices.”
January Cap Forecast Higher Than Pre-Hostilities
Cornwall Insight cautioned that even January's price cap is forecast to be higher than before hostilities began. For a typical household, the October forecast is £1,849 per year. Under Ofgem's updated definition of a typical consumer from July, the headline figure adjusts to £1,654, representing little change from July 2026 on a like-for-like basis.
The Cornwall Insight spokesperson added: “Elevated wholesale prices seen in May and parts of June will already be locked in, which means prices are unlikely to fall to the levels seen in the first three months of the year. The scale of any increase will depend on how long the geopolitical uncertainty continues.”
While July's higher prices will be cushioned by warmer weather, the October cap lands as households switch heating back on, having a greater impact on finances. The government has options to support households, and the new Prime Minister may introduce targeted support for vulnerable households if prices remain high.
