The energy price cap is expected to fall in January 2026 as a result of today’s increase, although the drop will be short-lived.
Energy consultancy Cornwall Insight predicts that the Default Tariff Cap – which sets a maximum unit rate and fixed charge that customers can be charged for their energy use – will fall by around £30 per year for most customers in January, to £1,725 per year. The current cap is £1,755 and runs from today (October 1) until the end of the year.
Cornwall Insight said its forecast includes the expected introduction of the Nuclear Regulated Asset Base (RAB) levy, which will pay for the development of new nuclear power stations. Cornwall Insight expects the RAB to add around £10 to energy bills from the first quarter of 2026, although the exact way in which Ofgem will incorporate the costs into household bills has not been revealed.
Unit costs in January are expected to be 26.33 pence/kWh for electricity and 6.00 pence/kWh for gas; the standing charge is expected to be £0.53/day for electricity and £0.33/day for gas.
But the January dip, caused by “relatively small shifts in the wholesale market”, will be short-lived, said Craig Lowrey, principal adviser at Cornwall Insight.
He added: “New charges, such as those in support of nuclear development, are starting to appear on bills, and that is a sign of things to come.”
Cornwall Insight expects the price cap to rise by around £100 from April compared to January. This is due to the rising costs of operating and maintaining the UK’s electricity and gas networks, the consultant said.
The increase would bring the limit back to approximately the same level as the beginning of this year; While still much lower than the peak of the 2022-2023 energy crisis, the cap remains significantly higher than pre-2022 levels.
“Any decline in January would represent a pause rather than a permanent decline,” Lowrey said. “In the spring, costs are expected to rise again as network and policy costs rise. It’s a reminder that while wholesale prices may soften, the costs of running and upgrading the UK’s energy system are moving in the opposite direction.”
Ofgem is reportedly discussing a proposal that would force every supplier to offer at least one lower flat rate tariff to combat the continued rise in network costs. Cornwall Insight said this would ultimately have little to no impact on most energy bills, given the scale of the energy transition underway in the country.
“Ultimately, adjusting bills, whether through lower flat rates or reallocating costs, will not deliver meaningful savings,” Lowrey said. “The only route to truly lower energy costs is a move towards safe, sustainable energy. That transition comes with an upfront price tag, and there must be an honest discussion about the costs and what they mean for customers.
“One thing is certain: the price ceiling alone cannot solve this crisis,” he added.
Major steps are being taken to upgrade and expand the UK’s energy infrastructure. In September, up to 1 GW of utility-scale solar projects were submitted for construction permits. The Lime Down and Rosefield solar projects are both co-located with battery energy storage systems (BESS).
In March, National Grid was granted planning permission for a major upgrade to the transmission network in Kent, part of the Great Grid Upgrade program which aims to enable 50GW of new offshore wind capacity on the UK electricity grid by 2030.
