British energy bills forecast to hit three-year high this winter
Household energy bills across Great Britain are expected to climb to a three-year high this winter as the impact of the Middle East war wipes out Andy Burnham's tax cut on electricity bills.
Intelligence analysis by Llama
The government's cap on energy prices is on track to rise by 4% from this October to the equivalent of £1,729 a year through the last three months of 2026, which could hit struggling households especially hard this winter.
Imagine you're trying to heat your home, but the gas to do it is really expensive. This makes your energy bills go up, and it's especially hard for people who are already struggling. The government is trying to help by cutting the tax on energy bills, but it might not be enough to make a big difference.
Analysis
Energy Market Prices Soar Amid Middle East War and Heatwaves Across Europe
Energy market prices are soaring amid the Middle East war, compounded by the extra use of expensive gas in power plants during heatwaves across Europe. This has led to a forecast quarterly price cap rise of 4% from this October to the equivalent of £1,729 a year through the last three months of 2026, which could hit struggling households especially hard this winter.
The government's cap on energy prices is determined by the cost of supplying energy to homes, including the average wholesale market costs in the months leading up to the start of each new cap. The analysts have estimated that electricity rates will rise from 26.11p a kilowatt hour to 26.57p, and gas charges will rise from 7.33p to 7.90p for households that pay via direct debit.
This is the equivalent of an annual dual fuel bill of £1,729 for the typical UK household, under the energy regulator's new calculations, which assume that households use less energy than before. Under the previous methodology, the price cap would rise to £1,940.69 from October, according to Cornwall, from £1,862 in the three months from July.
Rising energy bills aren't welcome at the best of times, but with winter approaching, this latest hike will hit struggling households especially hard. The consultancy expects bills will rise again in January based on current market prices, although this could change depending on developments in the Middle East.
UK's Reliance on Gas for Home Heating
The UK's reliance on gas for home heating is a particular concern as although electric heat pump sales are on the up, we still lag behind European neighbours going further and faster to reduce gas dependence. A government spokesperson said: 'We're acting to give consumers breathing space with the cost of living – cutting VAT on energy bills, ensuring around 6 million households get the £150 Warm Home Discount this winter, and making millions of homes cheaper to run through our Warm Homes Plan.'
Government Response
A government spokesperson said: 'We will do everything we can to shield consumers from global energy shocks and bring down bills for good.' The government is acting to give consumers breathing space with the cost of living, cutting VAT on energy bills, ensuring around 6 million households get the £150 Warm Home Discount this winter, and making millions of homes cheaper to run through their Warm Homes Plan.
Key points
- Household energy bills across Great Britain are expected to climb to a three-year high this winter.
- The government's cap on energy prices is on track to rise by 4% from this October to the equivalent of £1,729 a year through the last three months of 2026.
- The rising cost of gas will more than offset the new prime minister's promise to cut VAT from household electricity bills from October.
- The UK's reliance on gas for home heating is a particular concern as although electric heat pump sales are on the up, we still lag behind European neighbours going further and faster to reduce gas dependence.
If the government can find ways to reduce the UK's reliance on gas for home heating, it could help lower energy bills in the long run. Additionally, if the conflict in the Middle East is resolved quickly, it could also help stabilize energy prices.
The rising cost of gas and the UK's reliance on it for home heating make it likely that energy bills will continue to rise in the coming months. This could be especially hard for people who are already struggling to pay their bills.
