Millions of UK households are bracing for a slight but unexpected increase in their energy bills at the start of 2026, following a surprise announcement by Ofgem, the nation’s energy market regulator. On November 21, 2025, Ofgem revealed that the Energy Price Cap will rise by 0.2% from January 1, 2026, nudging the cap from £1,755 to £1,758 annually for a typical household. While the increase may sound modest—just £3 a year for a household using 11,500 kWh of gas and 2,700 kWh of electricity—the move has caught both industry analysts and consumers off guard, especially after earlier forecasts predicted a decrease in the cap.
The price cap, which applies to households in England, Wales, and Scotland on variable rate tariffs paid by direct debit, is designed to protect consumers from exorbitant energy costs. It limits what suppliers can charge per unit of gas and electricity, as well as associated standing charges. Actual bills, however, still depend on how much energy a household uses. According to BBC News, this seemingly minor change comes at a time when energy bills remain around 35% higher than before the Russian invasion of Ukraine and the subsequent global energy crisis.
For many, the timing couldn’t be worse. As the winter chill sets in, energy costs become a more pressing concern for households already grappling with high living expenses. The rise in the price cap was particularly surprising, given that energy consultancy Cornwall Insight had predicted a 1% drop for the same period. Instead, Ofgem’s decision means that, despite some relief in wholesale markets, consumers will see their bills edge up just as demand peaks.
So what’s driving this increase? Ofgem points to a mix of government policy costs and operating expenses as the main culprits. Notably, funding for projects like the Sizewell C nuclear power station adds about £1 a month to a typical bill. Standing charges—the fixed daily costs covering network maintenance and government levies—are also set to rise by 2% for electricity and 3% for gas from January 2026. According to Forbes Advisor, these policy-driven costs are starting to outweigh changes in wholesale energy prices as the main factor behind bill increases.
Wholesale prices, for their part, have actually been relatively stable. Ofgem reports that the cost of buying energy on the open market has fallen by 4% over the past three months. Tim Jarvis, Director General, Markets at Ofgem, explained, “While wholesale energy costs are stabilising, they still make up the largest portion of our bills which leaves us open to volatile prices.” He added that unpredictable global events—ranging from geopolitical tensions to weather disruptions—mean that price volatility remains a constant threat.
For heavy electricity users, the new cap will have a slightly bigger impact, as rising electricity unit rates are offset only partially by a small decrease in gas rates. The cap is calculated for a “typical” household, but the actual effect will depend on each household’s consumption. As BBC News notes, the best way to gauge the impact is to compare the percentage change to your own annual bill, rather than rely solely on the headline figure.
Charities and consumer advocates are sounding alarms about the ongoing affordability crisis. Dame Clare Moriarty from Citizens Advice remarked, “With bills still drastically higher than before the energy crisis, and due to rise again from April, it’s high time for decisions about the longer term.” The total amount of unpaid energy debt in the UK has reached a record £4.4 billion. Ofgem is now proposing that energy companies write off up to £500 million of this debt in 2026, a move aimed at easing the burden on those struggling the most.
Energy UK, which represents suppliers, urges anyone facing difficulty paying their bills to contact their provider for support. Dhara Vyas, chief executive of the group, acknowledged, “We know that far too many people are struggling to pay for the energy they need to use.” Suppliers can sometimes help by offering efficient appliances, more suitable tariffs, or ensuring people are receiving the correct benefits.
Meanwhile, the government is exploring additional cost-of-living support. Energy Minister Martin McCluskey confirmed that millions of families will receive £150 off their bills through the expanded Warm Home Discount scheme. There are also hints that Chancellor Rachel Reeves could announce the removal of VAT from energy bills in the upcoming Budget, a move that would cut about £80 from annual bills. Still, as Dr Craig Lowrey of Cornwall Insight cautions, “These costs will still need to be recovered, whether through bills or through taxes, as the pipes, wires, and networks that keep the lights on still need investment as we move to a cleaner, more secure energy system.”
The debate over how best to distribute these costs is intensifying. The Labour government, for its part, is pushing to build more infrastructure for renewable energy, aiming to reduce the volatility linked to fossil fuel prices. Energy Minister Michael Shanks told Sky News, “We obviously hope that that will happen as quickly as possible, but there’s no shortcut to this, and there’s not an easy solution to building the clean power system that brings down bills.” The Conservative opposition, however, argues that Labour’s net zero policies are “making energy unaffordable,” with Shadow Energy Secretary Claire Coutinho warning that such plans could lock households into higher bills for decades.
In the background, Ofgem is considering reforms to the way standing charges work. One proposal is to offer tariffs with no standing charges, shifting the cost to energy unit rates instead. This could benefit low-usage households but might penalize those with higher or essential energy needs, such as people relying on medical equipment. Dr Lowrey at Cornwall Insight points out, “Standing charges make up about 20% of household gas and electricity bills. As a result, those households looking to save money by reducing energy use may find no-standing charge tariffs helpful, offering a more straightforward way to manage their bills. However, the issue is more complex.”
Throughout the energy crisis, switching to a fixed-rate tariff has been promoted as a way to lock in lower prices—at least for a while. Fixed-rate deals, which guarantee a set price per unit for 12 or 24 months, are currently available below the new price cap level, according to Forbes Advisor. However, these deals often come with exit fees, and consumers risk missing out on savings if the cap falls in future quarters.
For the most vulnerable, the challenge is acute. Many pensioners in England and Wales have lost their Winter Fuel Allowance unless they receive Pension Credit or other means-tested benefits. Charities are urging the government to ensure that support reaches those in greatest need, especially as high energy prices are expected to persist for the foreseeable future.
As the UK heads into another winter of high energy costs, the debate over how to balance short-term relief with long-term investment in a cleaner, more secure energy system is only getting louder. While the latest price cap rise is small in percentage terms, it’s a reminder that the path to affordable and stable energy is anything but straightforward.
