Experts warn that at the beginning of 2027, household energy costs could rise by more than £200 compared to current levels.
The regulator Ofgem confirmed on Wednesday that in October the energy price cap will increase to £1,723 per year — an increase of 4% compared with the current figure of £1,663. The rise of £60 comes at a time when millions of Britons continue to suffer from the high cost of living, a problem that Andy Burnham has named one of his government’s priorities.
One of the first steps of the new Prime Minister was the announcement of a temporary reduction in VAT on energy bills, which will allow the average household to save £45 per year. The government of Keir Starmer also announced an average reduction of £150 in last year’s budget, despite the cancellation of two energy‑efficiency improvement programmes that had started in April 2026.
However, according to the forecast of the analytical company Cornwall Insight, another increase could occur in January — by £149, or 9% compared with the October level. In that case, the price cap would reach £1,872 per year, effectively nullifying the impact of recent government measures.
What the energy price cap means
The energy price cap determines the maximum amount that suppliers can charge per unit of energy to customers on a standard variable tariff, which is used by most households. This figure is presented as an annual bill for the average household, but the amount shown is not the absolute maximum the household could pay over a year.
In July, the energy regulator changed the methodology for calculating the price cap, taking into account lower average consumption levels. Under the old methodology, Cornwall Insight’s forecast would have been £2,107.
This is only a few hundred pounds less than the £2,500 level at which the government intervened in 2023 by introducing an energy price guarantee. The guarantee kept costs at that level for nine months, even though the price cap during the energy crisis caused by Russia’s invasion of Ukraine had risen to over £4,000. That intervention cost the government £2.9 billion.
Costs are now beginning to rise again against the backdrop of the ongoing conflict involving Iran, which has been intensifying since February. The blockade of the Strait of Hormuz — through which about 20% of the world’s oil is transported — has affected energy markets worldwide.
Proposals to help households
Against the backdrop of rising costs, the Resolution Foundation called on Andy Burnham to introduce a targeted programme to reduce bills for households most affected by winter energy price increases. Unlike the general energy price guarantee, this assistance would be means‑tested. The think‑tank estimates that it could deliver an average saving of £175 for those most impacted.
Energy Minister Miatta Fahnbulleh said: “Families are understandably concerned about the cost of energy bills this winter, which is rising due to the conflict with Iran. Energy is an everyday necessity and should be affordable for everyone, which is why from October we reduced VAT on electricity bills to give families some respite. This has limited the rise in the price cap and complements the £150 reduction in costs we secured for bills earlier this year. We will continue to look for ways to protect families from unaffordable bills.”
Source: The Independent UK
