Cornwall Insight has released its final forecast for the January – March 2026 Default Tariff Cap (price cap), following the closure of the observation window1 on 18 November.
The new forecast predicts the cap will fall to £1,733 a year for a typical dual fuel household2 in the new year. This would represent a decrease of £22 and 1% from the current price cap which is set at £1,755 per year.
The forecast includes the expected introduction of the Nuclear Regulated Asset Base (RAB) levy to help fund the next generation of new nuclear power stations. This is predicted to add a little over £10 a year to bills starting in January, while we have also incorporated changes under consultation by Ofgem into our forecasts – with the expectation that these will be introduced from the start of next year.
Cornwall Insight has kept VAT at 5% in its forecast, pending any announcement in the November Budget to the contrary. Based upon our forecasts, a cut to zero would further reduce bills by around £80 per year.
While our headline forecast figure is falling - largely due to slightly lower wholesale prices – we are seeing changes and additions to levies starting to creep into bills, with our assessment for the April 2026 cap standing at around £75 higher than that for January. This is largely due to rising charges associated with the operation and maintenance of the country’s energy networks, specifically electricity transmission and gas distribution charges. This is likely to be an enduring trend with wholesale energy prices, once the dominant driver of bills, forecast to drop to less than 40% of the cap and remain below that threshold for the rest of the decade.
The forecast increase in the April cap is likely to intensify calls for the government to intervene, whether through adjustments to levies, removal of VAT, introduction of social tariffs, or direct support to vulnerable households. The upcoming budget is almost certain to introduce measures to ease bills, potentially lowering the January cap and influencing future costs.
Ofgem is scheduled to announce the official cap on 21 November.
Figure 1: Cornwall Insight’s Default Tariff Cap forecast (dual fuel, direct debit customer)
Source: Cornwall Insight’s Default Tariff Cap Forecast Service
Note: 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.
Figure 2: Default Tariff Cap forecast, Per Unit Costs and Standing Charge (dual fuel, direct debit customer), These do not include the variances above.
Source: Cornwall Insight’s Default Tariff Cap Forecast Service
Dr Craig Lowrey, Principal Consultant at Cornwall Insight:
“January’s price cap dip might look like good news, but it’s only part of the picture. Bills are still well above pre-crisis levels and are set to climb again in April, and this time, it’s not higher wholesale prices driving the rise.
“The government pledged to lower bills, on the promise that investment in renewables would reduce our reliance on global energy markets and stabilise bills. But what we’re seeing now is a shift, wholesale prices are no longer the main story. The real pressure is coming from rising non-energy costs, with levies and policy decisions associated with that investment in renewables driving up bills.
“While adjustments to subsidies or VAT may make a dent in bills, the government doesn’t have full control over many of the underlying non-wholesale costs. A large share is tied to the essential work of maintaining and operating the networks — the pipes, wires and infrastructure that keep energy flowing. That’s not something that can be switched off when prices rise, and it’s only going to grow as we build out the system for net zero.
“The shift to renewables will bring long-term stability and energy independence, but it’s not free. The upfront costs are real, and they’re landing on bills now. The challenge will be balancing short-term affordability with long-term resilience, and crucially making sure people understand why that trade-off matters. If the government doesn’t bring the public with them on the energy transition, then it risks undermining the very policies intended to support them.”
Reference:
1. The period of time Ofgem use to monitor the market and calculate the wholesale element of the cap.
2. 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.
