Bills Remain Stable But New Forecast Signals Increases in April

Ofgem has today announced the January - March 2026 Default Tariff Cap (price cap) at £1,758 a year for a typical dual fuel consumer1. As expected, this represents only a marginal shift from the current level, with bills rising by just £3 or 0.2%.

Although wholesale energy prices have fallen slightly compared to the previous quarter, increases in non-wholesale costs, such as the Nuclear Regulated Asset Base (RAB) levy and other adjustments introduced by Ofgem, have limited the overall change in bills. This marks the beginning of a potential trend in which non-energy costs could emerge as the primary driver of household energy bills, rather than the wholesale market – which has historically provided much of the direction of and volatility in overall cost.

Our initial forecast for April indicates the cap will rise to £1,815, a £57 increase from the January cap, largely due to the expectation of higher charges for operating and maintaining the UK’s energy networks, particularly electricity transmission and gas distribution. Meanwhile, the July price cap is currently expected to drop slightly from April levels but remain above January levels.

Next week’s Budget could bring further changes to energy bills. Options under consideration include removing VAT, which would cut approximately £80 from January’s bill, and revising, moving, or eliminating certain levies and subsidies. While these measures could reduce bills, we would expect these to be recovered elsewhere in the energy value chain or wider economy.

Figure 1: Default Tariff Cap Forecast Q2 2026, Based on Typical Domestic Consumption (dual fuel, direct debit customer) including unconfirmed variances from Ofgem

Source: Cornwall Insight’s Default Tariff Cap Forecast Service

Figure 2: Default Tariff Cap Forecast Q2 2026, Per Unit Costs and Standing Charge (dual fuel, direct debit customer), without variances included

 Source: Cornwall Insight’s Default Tariff Cap Forecast Service

Note: This does not factor in the Nuclear RAB increase or the other Ofgem changes under consultation. All figures are national average unless otherwise stated. All intermediate and final calculations are rounded to two decimal places. Totals may not add due to rounding.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight:

“As expected, the January price cap is pretty much holding steady compared to October, but the story doesn’t end there. Our forecast shows bills climbing again in April, but not because of wholesale energy - it’s down to the non-energy costs that keep the system running and future proofed.

“With the Budget just around the corner, it is possible that households may not end up paying this cap level. There has been widespread speculation as to whether the Chancellor could potentially reduce energy bills – whether through removing VAT or adjusting levies. However, the reality is that this is a zero-sum outcome.

“These costs will still need to be recovered, whether through bills or through taxes, as the pipes, wires, and networks that keep the lights on still need investment as we move to a cleaner, more secure energy system. On top of that, policy costs, like support for nuclear projects and schemes to protect vulnerable households all come with a price tag. Shuffling these costs around might make energy bills look lower, but it won’t deliver real and enduring savings for most households.

“A low carbon system means more energy security and less exposure to the rollercoaster of fossil fuel prices. These upfront costs represent an investment in stability and affordability for the long run, and that’s a message we need to keep front and centre, while not ignoring the critical issue of immediate affordability for both households and businesses alike.”

Reference:

1.      Ofgem’s Typical Domestic Consumption Values (TDCVs), are set at 2,700 kWh per annum for electricity, and 11,500 kWh per annum for gas.

Notes to Editors

For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com

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