What is causing the fluctuations in gas and electricity prices?

UK household energy bills are expected to increase over the next six years as part of a significant 28 billion upgrade to the nations electricity and gas networks, the energy regulator Ofgem has announced. This comes in addition to the upcoming rise in the energy price cap starting in January 2026.

The government, however, has pledged in the Budget to reduce other energy-related charges, potentially saving a typical household around 150 annually.

Ofgems Role and the Planned Bill Increases

Ofgem oversees the energy market in England, Scotland, and Wales, ensuring consumer protection and regulating how energy companies operate and charge customers. The 28 billion project aims to strengthen the national grid, make energy supply more resilient, and reduce reliance on gas.

Consumers will contribute to this investment, with bills set to rise by 108 by 2031. Increases will begin in April 2026, though Ofgem projects that wholesale energy costs will decrease, offsetting some of the rise and resulting in a net increase of about 30 per year per household.

Government Measures to Reduce Energy Costs

The November Budget outlined steps to ease energy costs from April 2026. Existing levies supporting low-income insulation and renewable energy projects will largely shift to general taxation, saving households approximately 150 annually. After accounting for Ofgems planned increase, the average net reduction in energy bills is expected to be around 120 per year.

Energy Price Cap Changes

The energy price cap, affecting around 19 million households, sets the maximum charge for gas and electricity on standard variable tariffs. From 1 January to 31 March 2026, the typical dual-fuel direct debit household bill will be 1,758, up 3 from the previous quarter. Unit prices are set at 5.93p per kWh for gas and 27.69p per kWh for electricity.

Bill amounts vary depending on energy usage, property type, household size, and payment method. Submitting meter readings ensures customers are billed accurately, though smart meters automatically adjust bills.

Impact on Prepayment Customers

About six million households use prepayment meters. For the same three-month period, typical annual bills for these customers will be 1,711. Recent rules require suppliers to offer more options to clear debts before switching customers to prepayment meters, and some households are exempt from having these meters installed.

Fixed-Price Deals and Standing Charges

Fixed-price tariffs remain unaffected by the cap, providing predictable bills but potentially limiting benefits if prices fall. Ofgem advises consumers to compare deals carefully.

Standing charges, daily fees for connecting homes to energy networks, will be 55.75p for electricity and 35.09p for gas. By January 2026, all energy companies are expected to offer at least one tariff with a lower standing charge, though this approach has drawn criticism for merely shifting costs.

Debt Relief and Support Schemes

Energy debt in England, Wales, and Scotland reached 4.4 billion between April and June 2025, with over a million households lacking repayment arrangements. New measures could cancel debts for nearly 200,000 benefit recipients, funded by a 5 increase to all bills. Existing programs, including the Household Support Fund, Warm Home Discount, Fuel Direct Scheme, and Winter Fuel Payment, continue to support vulnerable households.

Author: Ava Mitchell