Household energy bills across Great Britain are projected to rise to their highest level in three years when a new price cap takes effect in October, according to analysis by energy consultancy Cornwall Insight. The typical dual fuel bill is expected to reach £1,729 annually for the final quarter of 2026, representing a 4% increase from the previous cap and marking the highest level since July 2023.
The price rise stems primarily from elevated wholesale energy costs driven by geopolitical tensions in the Middle East and increased reliance on expensive gas-fired power generation during recent European heatwaves. These market pressures are expected to more than offset the government’s plan to reduce VAT on household electricity bills beginning in October, a measure intended to provide households with financial relief on energy costs. The VAT cut alone is estimated to reduce bills by approximately £45 annually per household.
Cornwall Insight’s analysis indicates that electricity rates are forecast to increase from 26.11p to 26.57p per kilowatt hour, while gas charges will rise from 7.33p to 7.90p for households paying via direct debit. Under updated regulatory calculations that assume lower household energy consumption, the annual bill reaches £1,729, though it would reach £1,940.69 under the previous methodology. Regulator Ofgem is scheduled to formally announce the new price cap next Wednesday.
Energy analysts warn that the situation underscores Britain’s vulnerability to international energy market volatility, particularly its dependence on imported natural gas. Experts suggest that greater investment in alternative heating technologies, such as electric heat pumps, could reduce long-term exposure to global price shocks. The government has indicated it is supporting efforts to reduce consumer impact through various assistance programs, including a £150 warm home discount targeted at approximately 6 million households and initiatives aimed at improving home energy efficiency.
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