The new Ofgem price cap took effect on 1 October. For a typical household on a standard variable tariff paying by direct debit, the annual figure moves from £1,663 to £1,723, an increase of £60 a year or about £5 a month. The cap runs until 31 December. Four per cent is not a dramatic rise on its face, and it is still 52% below the 2022 peak of roughly £2,500. But the detail behind the number, and the forecasts for what comes next, matter more than the headline.
What changed?
Almost all of the increase comes from gas. Ofgem says gas bills are rising by around 8%, while electricity costs are broadly flat. Wholesale prices have gone up 11% over the past three months, and Ofgem ties that to continuing conflict in the Middle East and the volatility it has caused in global gas markets. Neil Kenward, Ofgem’s Director General for Markets, said high international gas prices are continuing to drive energy costs.
Electricity looks calmer largely because of a policy decision. The government has removed VAT from domestic electricity bills, which Ofgem says saves customers about £45. Without that, the picture would be less comfortable. It also shows how much the final bill depends on choices made in Westminster as well as on what happens in the gas market.
One quirk is worth knowing. Ofgem updated its assumptions about typical consumption in July, and now assumes the average home uses 17% less gas and 7% less electricity than before. That makes the headline figure look lower than it would have under the old assumptions, so comparisons with earlier quarters need care.
What the forecasts say about January?
The October rise is the smaller part of the story. Analysts quoted this week expect the cap to climb by a further 12% to 14% from January 2027. Suppliers’ own forecasts put the typical annual bill at £1,932 for EDF, £1,941 for E.ON Next and £1,970 for British Gas. Those are predictions, not announced figures. Ofgem will publish the actual January cap in November, and it will depend on how wholesale gas behaves between now and then.
About 35% of households, around 11 million, are on fixed tariffs and are unaffected for now. Ofgem’s advice is that fixed deals are available more than £100 below the cap level, which is a reminder that the cap is a default price, not a bargain.
Why this matters for businesses?
The price cap covers households, not companies. Business energy contracts are priced separately, and none of Ofgem’s announcement deals with non-domestic customers. But the cause of the rise, wholesale gas, is the same cost that feeds into business contracts. When wholesale prices move, suppliers reprice what they offer to commercial customers too, and the lag between the two is shorter than many finance teams assume.
That makes the next few weeks a decision point for anyone whose fixed contract ends before spring. If a renewal falls between now and the end of the winter, the sensible question is whether to lock in before the market moves again or wait on the hope that prices ease. Nobody can answer that with certainty, and the January forecasts suggest the risk is weighted toward higher prices, though forecasts have been wrong before. What you can do is find out your renewal dates, look at what your contract says about notice periods and deemed rates, and get quotes early enough that you are not forced to accept whatever your supplier rolls you onto.
Businesses with flexible or pass-through contracts have more exposure to wholesale swings, and those on fixed terms have less, until the fixed term ends. Either way, it is worth knowing which of the two you are.
Usage is the other lever. Ofgem’s own revised assumptions show that household consumption has fallen noticeably, which is partly the effect of efficiency measures and behaviour. For a business, a metering and usage review costs little compared with a double-digit rise in the unit rate, and cutting consumption lowers the bill whatever the market does.