UK households prepare for another energy price change as the energy pricing authority, Ofgem, makes its bi-annual pricing announcement for the new year of 2026. The pricing announcement brings mixed reactions to domestic households already experiencing the effects of the high cost of living in the country. Even if the cost change may look small to many, the implications of the change look more complex.
Energy price caps inch up for typical households
According to the gas and electricity industry regulator, Ofgem, there would be a small increase of 28p per month for both gas and electricity for the typical domestic consumer who pays their costs under the Direct Debit system. At the end of the proposed scheme in January 2026, the dual-fuel domestic tariff would cost a total of £1,758 per year, a slight increase of 0.2% from the previous tariff.
As compared to the same period in the year 2025, there is a change of 1% or £20 in the new maximum amount. Taking into account the cost of inflation, the new maximum amount shows a fall of 2% or £37 compared to the same period last year. This brings some relief to the households that have been facing the challenges of the cost of living despite the new maximum amount.
Prices for both electricity and gas depend on the market
Those who pay their electricity bills on the standard variable tariff rate by direct debit will have to pay 27.69p per kWh in England, Scotland, and Wales. The cost of the standing charge per day has been fixed at a total of 54.75p per day. At the same time, the cost of gas will have to be paid at 5.93p per kWh. The cost of the standing charge per day has been fixed at 35.09p. All the rates will incur a 5% VAT charge.
Budget measures announced by the government offer big cuts in bills
One of the biggest plans that has been introduced in the Autumn Budget regarding the structure of energy costs starting from April 2026. The average domestic energy cost would be reduced by £150. This would be achieved by reducing the cost of financing significant energy support schemes. These costs would fall in the coming years due to the expiry of the Energy Company Obligation scheme. There would also be the financing of 75% of the cost of the Renewables Obligation scheme.
The composition of the cost-cutting measures includes savings of £88 for the financing of three-quarters of the cost of the Renewables Obligation in taxes, additional savings of £59 for the cancellation of schemes of Energy Company Obligation, in addition to savings of £7 for cuts in VAT. Domestic consumers will enjoy different levels of savings depending on their rates of usage, in which high usage electric storage-heated households can enjoy a maximum of £442 per year.
Types of household savings:
- Typical dual-fuel customer: £134 per year saving
- Rural high-demand properties: £205 per year
- Households of medical equipment: £224 per year
- Low-demand homes: £88 per year
Debt relief schemes target vulnerable energy Users
A plan for a Debt Relief Scheme to be launched in the initial months of 2026 has been proposed by Ofgem for the benefit of approximately 195,000 people in the country who receive means-tested benefits. The debt relief plan would target the concerns of the rising debt of the targeted vulnerable households. The debt relief plan promises to provide relief to the worst-affected households.
The latest update on the price cap of energy helps to indicate that the balance between the reality of the market and the need to shield the consumer has been a reality in the energy market in the United Kingdom. Even though the small increase in Q1 2026 may be a problem for domestic consumers of energy, the considerable action taken by the government to ensure the average customer saves up to £150 in April comes as a relief to many.
