The energy price cap is on track to remain stable this winter but could see an increase in the next six months, as predicted by industry experts. Prior to the 2% rise in the default tariff coming into effect from Wednesday until the end of December, Cornwall Insight forecasts that this latest increase will likely be offset for the January-March quarter. Despite expectations of a £10 per year levy to support new nuclear power stations, there was a £30 decrease in average annual bills at the beginning of 2026.
Cornwall Insight has cautioned that additional government-imposed policy costs could result in a £100 rise in bills starting from April, on top of existing charges to fund the green energy transition and support households through the expanded warm home discount. Depending on wholesale market fluctuations and regulatory decisions on implementing these charges, the price cap could potentially reach £1,855 from the current October-December average of £1,755.
Policy costs aimed at combating climate change are increasingly influencing the price cap level. Wholesale prices, impacted by Russia’s invasion of Ukraine earlier in 2022, have been the primary driver of escalating energy bills post-COVID pandemic. However, they have made minimal contributions to the October increase due to recent stability in gas prices stemming from reduced global demand and increased flows.
The government’s focus is on reducing bill volatility by shifting away from gas towards wind and new nuclear energy, including modular reactors. In the interim, households may face higher charges to support the necessary infrastructure for this transition. Minister for energy consumers, Martin McCluskey, emphasized the government’s mission to move towards cleaner, domestically produced power to alleviate the rollercoaster of fossil fuel prices.
Efforts to assist struggling households include expanding the Warm Home Discount to over six million families, providing relief to one in five households with energy bills. Additionally, plans for a significant home upgrade program are in the pipeline to improve up to five million homes, making them more cost-effective and environmentally friendly to run. Ofgem’s recent data revealed a record £4.4bn in household energy debt during the second quarter of the year, prompting collaboration with the government to explore potential solutions, such as a debt relief scheme.
Energy expert Will Owen from Uswitch.com commented on Cornwall Insight’s projections, attributing the predicted rise to the escalating costs of modernizing the energy grid. Owen recommended switching to a competitively priced fixed deal to mitigate expected bill increases, noting that there are currently 26 fixed deals priced below the October price cap, offering savings of approximately £234 for the average household.
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