UK households face energy price cap rise of £60 from 1 October
Key Points
- Ofgem's price cap rises 4% to £1,723 a year from 1 October to 31 December.
- Gas unit rates climb 8%; electricity unit rates rise 1%.
- VAT on electricity drops to zero on 1 October, saving around £45 a year.
- Cornwall Insight forecasts a further 9% rise in January, to £1,872.
- The Resolution Foundation wants targeted support ready to switch on from January.
Ofgem has raised the energy price cap by 4% to £1,723 a year for a typical dual-fuel household paying by direct debit, up £60 from the current £1,663, from 1 October to 31 December.
Gas is driving almost all of the increase, with gas unit rates up 8% this quarter and the gas standing charge up 2%. Electricity unit rates rise 1% while the electricity standing charge falls 4%.
The exact rise is 3.6%, which Ofgem rounds to 4%. Prepayment customers will pay £1,678 a year and those who pay on receipt of a bill £1,861.
The cap is a limit on unit rates and standing charges, not on your total bill, so a household using more than the typical amount pays more than the headline figure.
The increase lands despite VAT on domestic electricity falling from 5% to zero on 1 October, worth around £45 a year to a typical household. Without that cut, the cap would sit nearer £1,770, a rise of 6% rather than 4%.
The new figure also reflects Ofgem’s updated definition of a typical household, introduced in July. On the previous consumption assumptions, the October cap would equal £1,941 a year, against £1,862 now.
Gas hit
Households burn 33% of their annual gas between October and December, according to the Resolution Foundation, so the gas-led rise arrives exactly as heating goes back on. Each unit of gas used in the final quarter will cost 27% more than in the same period last year.
Ofgem points to international gas prices as the cause. “High international gas prices are continuing to drive energy costs in the UK,” said Neil Kenward, Ofgem’s Director General for Markets.
January is forecast to be worse
Cornwall Insight forecasts a further 9% rise in the new year, taking a typical annual bill to £1,872 from January. EDF’s latest prediction puts the January 2027 cap higher still, at £1,932, with the Resolution Foundation pointing to a 12% jump and wholesale gas prices at a new post-Iran high.
That would leave energy bills in January around a fifth higher in real terms than at the start of this year.
The Resolution Foundation wants targeted support designed, costed and ready to switch on from January, arguing that £2 billion would give the poorest 40% of households an average of £175 a year.
“This gas-led rise in the energy price cap will land just as boilers are turned back on, pushing family bills up at the worst time of the year,” said Jonathan Marshall, Principal Economist at the Resolution Foundation.
Fixed tariff customers are unaffected until their deal ends. Anyone on a standard variable, deemed or tracker tariff moves to the new rates on 1 October.
