Reacting to Ofgem’s announcement of the energy price cap for 1 October to 31 December 2026, published on the morning of Wednesday 26 August 2026, and to MoneySavingExpert’s analysis by utilities analyst Ruby Harbour, “Energy Price Cap still to RISE 3.6% from 1 October even after the Government’s VAT cut”, also published 26 August 2026. BBC News reported the same announcement under the headline “Household energy bills to hit three-year high as Ofgem announces 4% rise from October”. Every figure below is taken from Ofgem’s published unit rates and standing charges, read directly on 26 August 2026, or is our own arithmetic on those rates, shown in full so you can check it.
Our view: the headline £1,723, up around 4%, covers two fuels that moved in opposite directions. Electricity got a tax cut and a cheaper standing charge; gas went up 8.7%. On Ofgem’s rates, the typical household’s electricity bill falls by £3.36 a year while its gas bill rises by £63.13. The government’s VAT relief applies to electricity, not to gas, the fuel that rose.
As we set out on Monday, the headline describes a typical household. This time the bigger difference is between gas-heated and all-electric homes.
What Ofgem published
The cap is set every three months and it limits unit rates and standing charges, not your bill. From 1 October to 31 December 2026, for Direct Debit customers in England, Scotland and Wales, the published rates are:
- Electricity: 26.32p per kWh (was 26.11p, up 0.8%) and 54.83p a day standing charge (was 57.19p, down 4.1%).
- Gas: 7.97p per kWh (was 7.33p, up 8.7%) and 29.68p a day standing charge (was 29.04p, up 2.2%).
- VAT: gas still carries 5%. Electricity carries none from 1 October 2026 to 31 March 2027.
Ofgem’s headline figure of £1,723 a year is those rates multiplied by a typical household using 2,500 kWh of electricity and 9,500 kWh of gas. Prepayment is capped at £1,678 and paying on receipt of a bill at £1,861.
The gap between the cheapest and dearest payment method is £183 a year. Moving from paying on receipt of a bill to Direct Debit saves £138 a year on typical usage.
Worked example: where the £60 goes
Built entirely from Ofgem’s published rates above, on its typical usage of 2,500 kWh electricity and 9,500 kWh gas, Direct Debit, Great Britain average.
July to September 2026
Electricity: 2,500 × 26.11p = £652.75, plus 365 × 57.19p = £208.74 → £861.49
Gas: 9,500 × 7.33p = £696.35, plus 365 × 29.04p = £106.00 → £802.35
Total: £1,663.84
October to December 2026
Electricity: 2,500 × 26.32p = £658.00, plus 365 × 54.83p = £200.13 → £858.13
Gas: 9,500 × 7.97p = £757.15, plus 365 × 29.68p = £108.33 → £865.48
Total: £1,723.61 — which is the £1,723 in the headlines.
The change: electricity −£3.36. Gas +£63.13. Net +£59.77. Gas has gone from the smaller half of the bill to the larger one, and it now costs more than the electricity in a home that has both.
The increase is on gas, partly offset in the headline by an electricity decrease that only exists because of a temporary tax change.
The electricity VAT cut
VAT on domestic electricity fell from 5% to zero for this cap period. The pre-tax price of electricity rose at the same time.
The July rate of 26.11p included 5% VAT, so the underlying price was 24.87p. October’s 26.32p includes no VAT at all, so 26.32p is the underlying price. The pre-tax cost of a unit of electricity has therefore risen about 5.8%. Had VAT stayed at 5%, October’s electricity would have been priced at 27.64p a unit and 57.57p a day, and the typical household’s electricity bill would have been about £901 rather than £858. So the zero rate is worth roughly £43 a year on typical usage — and MoneySavingExpert calculates that without it the overall rise would have been roughly 6.2% instead of 3.6%.
The relief prevented a bigger increase. It runs to 31 March 2027. Unless the government extends it, 5% returns to electricity on 1 April 2027 — about £43 a year back on the typical bill, before the market moves at all.
Gas-heated and all-electric homes
Illustrative households, priced on Ofgem’s published rates. Both figures annualise the quarter’s rates, which is how Ofgem’s own headline works.
A gas-heated three-bedroom home using 2,900 kWh of electricity and 11,000 kWh of gas.
July rates: electricity £757.19 + £208.74 = £965.93; gas £806.30 + £106.00 = £912.30. Total £1,878.23, about £156.52 a month.
October rates: electricity £763.28 + £200.13 = £963.41; gas £876.70 + £108.33 = £985.03. Total £1,948.44, about £162.37 a month.
Change: +£70.21 a year. Electricity down £2.52. Gas up £72.73.
An all-electric flat using 5,000 kWh of electricity and no gas.
July rates: £1,305.50 + £208.74 = £1,514.24. October rates: £1,316.00 + £200.13 = £1,516.13.
Change: +£1.89 a year.
One household pays £70 more a year and the other £2. The £70 is not spread evenly across the year in the way a monthly average implies, because the extra 0.64p a unit is only charged on gas you actually burn, and most gas is used in the months you heat the house. A Direct Debit set on last year’s pattern may rise in November.
Combined standing charges, they fall from 86.23p a day to 84.51p — £308.46 a year, down £6.28. Standing charges cannot be reduced by using less, so a cut there helps low users most. Our guide to cutting your bills goes through what the rest of a household budget can absorb when the energy line will not move.
Four things to do before 1 October
- Submit a meter reading on or as close to 30 September as you can manage. Without a reading at the changeover, your supplier estimates how much you used before and after the price rise. Smart meters send readings automatically; otherwise photograph the dials.
- Compare any fix against the October rates. Compare a fixed deal’s unit rate and standing charge against the October cap figures for your own region, which Ofgem publishes in regional tables on the same page linked above. Martin Lewis said on 26 August that the cheapest fixes were sitting around 7% below the current cap, which is roughly 10% below October’s level. Read the exit fees before you sign anything. Fixing removes the risk of the January cap going against you, and removes the chance of it going in your favour.
- Check the Warm Home Discount when the scheme reopens in October 2026. It is a one-off £150 off your electricity bill, applied automatically if you qualify in England and Wales, though people in Scotland may need to apply to their supplier.
- Recalculate your own Direct Debit before your supplier does. Take last winter’s actual kWh from a bill, price it at the October rates above, divide by twelve, and compare that with what you are paying now. If your supplier proposes something well beyond your own figure, you have the arithmetic to challenge it. If your figure is higher, you have three weeks to prepare. Our survival budget calculator works out what the household has to cover.
If you are struggling with the winter bill now. Speak to your supplier before you miss a payment. Suppliers have obligations to offer affordable repayment arrangements. Ask to be added to the Priority Services Register, which is free. And get free, independent help the same week from MoneyHelper, StepChange or National Debtline. Our money worries page lists all three with direct links.
What is still uncertain
First, this cap only runs to 31 December 2026. Ofgem sets the level every three months, so the figure covering 1 January to 31 March 2027 — the one that decides the back half of winter — has not been set, and January to March is when the heating bill is at its heaviest. Second, the electricity VAT zero rate expires on 31 March 2027 and the government has not said whether it will be extended; the sensible planning assumption is that 5% comes back. Third, none of this touches Northern Ireland, which sits outside the price cap and has its own arrangements.
Gas went up, and the VAT relief went to electricity. If your heating is gas, your gas costs 8.7% more per unit from 1 October. Read why the gas increase showed up in July’s inflation figures, and take a meter reading on the 30th.