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.
Here is our view, before the detail. The number leading the news — £1,723, up around 4% — is accurate and almost useless, because it is a single figure covering two fuels that have just moved in opposite directions. Electricity got a tax cut and a cheaper standing charge. Gas got neither and went up 8.7%. Work it through on Ofgem’s own rates and the typical household’s electricity bill falls by £3.36 over a year while its gas bill rises by £63.13. The entire increase is gas. Which means the government’s cost-of-living relief has been applied to the fuel that was not the problem, in the quarter when the other one starts running.
On Monday we said the headline would describe a household that isn’t yours. It does. But the more useful split this time is not big house versus small house. It is gas versus electric.
What Ofgem actually 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.
Notice that last line before we go further. The gap between the cheapest and dearest payment method is £183 a year, and it has nothing to do with how much energy anybody uses. If you pay quarterly on receipt of a bill and you could move to Direct Debit, that is £138 a year available for the price of one phone call.
Worked example: where the £60 actually 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.
That is the whole story of this cap in three lines. There is no general 4% increase happening to households. There is a gas increase, partly masked in the headline by an electricity decrease that only exists because of a temporary tax change.
The VAT cut is real, and it has already been mostly eaten
VAT on domestic electricity fell from 5% to zero for this cap period. That is a genuine saving and it is worth having. It is also smaller than it looks, because the pre-tax price of electricity rose underneath it.
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%.
Two things follow that are worth holding on to. The relief prevented a worse increase rather than delivering a saving; nobody’s bill is going down because of it. And it runs only to 31 March 2027, which is exactly the winter and not a day more. 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 heating or electric heating decides your winter
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. Effectively flat.
Same cap, same announcement, same news bulletin. One household is £70 worse off and the other is £2. And 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 gas is burned in the months you are heating the house. The increase and the cold arrive together, which is precisely why a Direct Debit set on last year’s pattern will quietly climb in November and be presented to you as settled.
The one piece of unambiguous good news is buried in the standing charges. Combined, they fall from 86.23p a day to 84.51p — £308.46 a year, down £6.28. It is a small number, but standing charges are the part of the bill nobody can avoid by being careful, so a reduction there is worth more to a low-user than an equivalent cut in unit rates. 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 worth doing before 1 October
- Submit a meter reading on or as close to 30 September as you can manage. This is the single highest-value ten minutes in this article. If your supplier has no reading at the changeover, it estimates the split between September and October usage — and it has every incentive to be generous to itself about how much of your gas fell after the price went up. A dated reading removes the argument entirely. Smart meter owners are already covered; everyone else should photograph the dials.
- Compare a fix against the October rates, not the July ones. The meaningful comparison is 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 — that trade is a judgement about your own nerves and your own budget, not a right answer.
- Check the Warm Home Discount when the scheme reopens in October 2026. It is a one-off £150 off your electricity bill, usually applied automatically if you qualify in England and Wales, though people in Scotland may need to apply to their supplier. £150 against a £60 increase is not nothing.
- 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 — and if your own figure is higher, you have three weeks to prepare for it rather than three days. Our survival budget calculator is built for exactly this: working out what the household genuinely has to cover before deciding what else moves.
If the winter bill is already frightening, do this part first. Speak to your supplier before you miss a payment rather than after — suppliers have obligations to offer affordable repayment arrangements, and that conversation is far easier while the account is current. 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. Coaching is the right tool for planning a winter; it is the wrong tool for an emergency this week.
What is still uncertain
Three things are genuinely not settled, and it is worth knowing which is which. 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.
What is settled is the shape of it. Gas is what went up, gas is what heats most homes that have it, and the relief went to the other fuel. If your heating is gas, the sentence to take away from Wednesday is not “bills are up 4%”. It is that your gas costs 8.7% more per unit from 1 October, on a bill that has only just started running. Read why the gas increase showed up in July’s inflation figures for how this has been building, and take the meter reading on the 30th.