Price Cap Forecast to Fall 8% in April

Ahead of January’s Default Tariff Cap (price cap) rise, Cornwall Insight has released new forecasts for the April 2026 cap. The projection puts the cap at £1,620 per year for a typical dual‑fuel household- an 8% decrease (£138) from the January 2026 level of £1,758.

The main drivers behind this expected reduction are recent policy decisions announced in the Budget. These include shifting 75% of Renewables Obligation (RO)² costs from consumer energy bills into general taxation, as well as the decision not to further extend the Energy Company Obligation (ECO)³.

An update from NESO on interim electricity Transmission Network Use of System (TNUoS) charges, has also contributed to the reduced forecast. While these charges - which contribute to the costs of building, maintaining and operating the grid - are still set to rise, the increase per household is now £10 less than previously expected.

While TNUoS charges for 2026–27 will increase by less than previously forecast for all electricity customers, unlike households, our Business Energy Bill Index, due to be released in January, shows costs are still expected to rise for many businesses from April unless they qualify for relief under the Government’s energy intensive industry scheme4.

Meanwhile, wholesale energy prices have softened in recent weeks, helped by increased US LNG supply, declining pressure from EU gas storage requirements, milder winter weather conditions, and renewed optimism around the possibility of a Russia–Ukraine peace agreement. These developments have contributed further downward pressure on forecasts, however in contrast to previous years when wholesale gas prices were the primary cause of bill movement, today policy changes dominate.

DESNZ is currently consulting on moving the Warm Home Discount cost from the standing charge element of household energy bills to the unit rate. As a decision by Government on this is pending, this potential change has not been factored into our projections.

Looking ahead, bills are expected to continue their downward trend into July, with current forecasts showing a small additional decrease in the cap for a typical household.

Cornwall Insight’s Default Tariff Cap forecast, Per Unit Costs and Standing Charge (dual fuel, direct debit customer) 

Source: Cornwall Insight’s Default Tariff Cap Forecast

Notes:  

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.

DESNZ is currently consulting on moving the Warm Home Discount cost from the standing charge element of household energy bills to the unit rate. As a decision by Government on this is pending, this potential change has not been factored into our projections.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight:

“Households will welcome a cut in April, bringing the cap to its lowest level since 2024. That’s a step towards the government’s £300 reduction target by 2030 and will ease some pressure on both families and policymakers. But we need to be clear - costs aren’t vanishing, they’re shifting. Moving the Renewables Obligation from bills to taxation may feel like a win, but ultimately, it’s still going to be paid by the public.

“The transition to net zero isn’t cheap, but it’s the only route to genuinely lower bills in the long term. Turning back now might look tempting, but in the long run it would continue to leave consumers exposed to the same volatile global markets that contributed to the energy crisis. Staying the course on clean energy is the sustainable choice, but admittedly not the easiest or most politically expedient.

“Crucially, as we move forward, vulnerable households must be protected. Cutting bills today is welcome, but without targeted support and a clear plan for fairer funding, the benefits of net zero could bypass those who need them most.”

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.

2.      The Renewables Obligation places an obligation on electricity suppliers to procure a proportion of electricity from renewable sources

3.      The Energy Company Obligation required large energy suppliers to help low-income households increase their energy efficiency and cut their heating bills.

4.      From April 2026, around 500 eligible energy-intensive businesses will see network charge discounts rise to 90% under the British Industry Supercharger