The energy price cap is on course to remain steady through this winter but may jump in six months’ time, according to a respected industry forecast.
Ahead of the 2% rise in the default tariff, which is imposed from Wednesday until the end of December, Cornwall Insight said it was currently predicting that the latest increase would be eradicated for the January-March quarter.
It saw a £30 drop to average annual bills at the start of 2026, despite the specialist saying the expected addition of a £10 per year levy to support the next generation of new nuclear power stations.
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Cornwall Insight warned that further government-imposed policy costs could add £100 more a year to bills from April, building on higher charges in place to pay for the green energy future and help for households through the expanded warm home discount.
Its prediction, which is subject to wholesale market movements and regulatory consultations on how to apply such charges to bills, would see the cap hit £1,855 from the October-December average of £1,755.
Policy costs to assist the battle against climate change are playing an increasing role in determining the level of the price cap.
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Why is the energy price cap rising?
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There are 34 million households, including those on pre-payment meters and other standard variable arrangements, on the energy price cap.
There are a further 20 million unaffected by the price cap shift as they are on fixed-rate deals.
They are only exposed to changes in raw energy prices and new policy costs when their term ends.
Wholesale prices – volatile since Russia’s invasion of Ukraine back in February 2022 – have been the main driver of rising bills since the end of the COVID pandemic.
But they are making little contribution to October’s increase as gas prices have remained stable recently due to weaker demand in the global economy and higher flows.
Much, however, depends on a lack of global shocks. The government wants to remove that volatility from bills through a focus away from gas towards wind and new nuclear, including through modular reactors.
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Energy boss makes case for nuclear future
The problem for household bills in the interim is that it means even higher charges to help pay for the new infrastructure to support that shift in electricity provision.
Minister for energy consumers, Martin McCluskey, said: “Wholesale gas costs remain 75% above their levels before Russia invaded Ukraine. The more renewables on the system, the cheaper the wholesale price of electricity, which is why the only answer for Britain is this government’s mission to get us off the rollercoaster of fossil fuel prices and onto clean, homegrown power we control.”
He said of efforts to support struggling households: “We are taking urgent action to support vulnerable families this winter, expanding the £150 Warm Home Discount to more than six million families, which helps one in five households with their energy bills.
“In the coming weeks, we will be announcing details of the biggest home upgrade programme in British history to improve up to five million homes, making them cheaper and cleaner to run.”
Recent figures by Ofgem showed a record sum for household energy debt.
The regulator revealed a £4.4bn total during the second quarter of the year – up by £750m on the same period in 2024.
The government has said it is working with Ofgem to find solutions. Ideas include the possibility of a debt relief scheme.
Will Owen, energy expert at Uswitch.com, said of the Cornwall Insight predictions: “The predicted rise is driven by the increasing costs of making our energy grid fit for the future, and these charges are being passed on to bill-payers.
“If you’re on a standard variable tariff, you can beat these expected rises and save on bills by switching to a well-priced fixed deal now.
“There are currently 26 fixed deals priced below the October price cap, with savings of around £234 for the average household.”
