Summary
The energy price cap will increase by 4% from October 2026, meaning a typical household's annual bill could rise by around £65. Despite this cap increase, a positive shift sees the return of competitive fixed-rate energy deals, with some offering savings of up to £173 per year compared to the new cap level.
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What this means in plain English
Simply put, your energy bills are heading up again. Ofgem, the energy regulator, has confirmed that the maximum amount suppliers can charge for each unit of gas and electricity will increase by 4% from October. This is mainly due to global wholesale energy prices, which have been climbing again, with factors like international conflicts and higher demand impacting costs.
However, there's a glimmer of good news. For the first time in a long while, energy companies are starting to offer fixed-rate tariffs that are cheaper than the price cap. This means you could lock in a lower price for your gas and electricity for a set period, typically 12 or 24 months, potentially saving you money compared to staying on your supplier's standard variable tariff. These new fixed deals are a notable change from recent years when they were almost always more expensive than the cap.
Here's a quick breakdown: - Price Cap Increase: The maximum amount suppliers can charge per unit is going up by 4% in October. - Wholesale Prices: Global gas and oil prices are on the rise, pushing up the costs for suppliers. - Fixed Deals Return: Some fixed-rate tariffs are now cheaper than the new price cap. - Winter Bills: Expect higher bills as the weather gets colder and demand for heating increases.
How this affects your household bill
From 1st October 2026, if you are on a standard variable tariff (SVT), your annual energy bill, based on typical consumption, is expected to rise by approximately £65, taking the average to around £1780 per year. This increase will be reflected in the unit rates for both gas and electricity, as well as potentially the standing charges, though the main impact is on the per-unit cost.
Those most affected will be households on standard variable tariffs, which most UK homes are currently on. Prepayment meter customers are also subject to the price cap and will see their costs rise. If you have electric heating, your electricity consumption is likely higher, so a unit rate increase will have a more significant impact on your overall bill.
Crucially, this is the first of two expected increases, with another 9% rise forecast for January 2027, pushing the cap closer to £1820. However, the emergence of fixed deals below the cap offers a chance to mitigate these increases. By switching to a fixed tariff, you could save up to £173 annually compared to staying on the fluctuating price cap. This saving is realised by locking in rates that are lower than the upcoming cap, providing certainty and potentially shielding you from further price rises.
Check My Bill
With the energy price cap set to increase and new, more competitive fixed deals appearing, now is a critical time to review your energy tariff. Many households are still paying more than they need to, especially if they haven't switched in a while. Use our free Bill Checker to see in 30 seconds — most users find savings of £200-£500 per year.
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Shop on Amazon### Why is the energy price cap increasing in October? The energy price cap is increasing primarily due to a rise in global wholesale energy prices. Factors such as increased demand as winter approaches, geopolitical events affecting supply, and higher operational costs for energy companies contribute to this upward adjustment.
What is a fixed-rate energy deal and why are they suddenly cheaper?
A fixed-rate energy deal locks in your unit rates for gas and electricity for a set period, typically 12 or 24 months. These deals are becoming cheaper because the market is starting to stabilise, and some suppliers are now able to offer tariffs below the future price cap, aiming to attract new customers.
How much could I save by switching to a fixed-rate tariff?
If you switch to one of the competitive fixed-rate tariffs currently available, you could save up to £173 annually compared to staying on the standard variable tariff under the new October price cap. These savings offer protection against future price cap increases.
Who will be most impacted by the price cap rise?
Households on standard variable tariffs, which most UK customers are on, will see the direct impact of the price cap increase. Prepayment meter customers are also affected, and those with higher energy consumption, such as homes with electric heating, will experience a larger increase in their overall bills.
When is the next energy price cap review expected?
After the October 2026 increase, the next energy price cap review is expected for the quarter covering January to March 2027. Current forecasts suggest another significant increase is likely for this period, highlighting the importance of considering fixed deals now. Please note, PowerGuardian cannot guarantee savings on every deal.