What’s happening with gas and electricity prices?

Typical household energy costs will increase slightly on Thursday when the new energy price cap takes effect.

Separately, the regulator Ofgem has said customer bills will rise by around £30 a year over the next six years to help fund a major investment in the UK’s energy network.

However, that announcement followed an earlier government pledge in the budget to remove some other costs from annual energy bills, worth about £150 to a typical household.

The energy cap covers around 19 million households in England, Wales, and Scotland, and it is set by Ofgem every three months.

It fixes the maximum amount customers can be charged for each unit of gas and electricity on a standard – or default – variable tariff for a typical dual-fuel household that pays by direct debit.

Actual bills depend on the amount of energy used.

The price cap sets the unit prices for gas and electricity, but your household’s actual bill depends on the overall amount you use and how you pay for it.

The type of property you live in, how energy efficient it is, how many people live there and the weather all make a difference.

The Ofgem cap is based on a “typical household” using 11,500 kWh of gas and 2,700 kWh of electricity a year with a single bill for gas and electricity, settled by direct debit.

The vast majority of people pay their bill this way to help spread payments across the year. Those who pay every three months in cash or a check are charged more.

In December, Ofgem said it had approved a £28bn investment to improve the electricity and gas grids in Great Britain.

It says this will strengthen the energy supply and better shield customers from volatile energy prices. It will also reduce Britain’s dependence on gas.

Customers will foot part of the cost, through an additional £108 added to energy bills by 2031. Bills will start to rise from April 2026.

However, Ofgem says the investment will make wholesale energy cheaper overall, saving households about £80 a year, leading to a net energy bill rise of about £30 a year.

In the November Budget, Chancellor Rachel Reeves announced measures to cut energy costs from April 2026.

At the moment, energy bills in England, Scotland and Wales already include additional charges to help fund insulation for low-income households and subsidies for green energy projects such as wind farms and solar panels.

Reeves said the insulation scheme – called the Energy Company Obligation – would be scrapped, and for three years, renewable energy projects will be 75% funded by general taxation instead of a levy on energy bills.

She said this would take £150 off average annual dual-fuel bills.

After taking into account the increase as a result of the Ofgem announcement, it means average energy bills should fall by about £120 a year.

Submitting a meter reading when the cap changes means you are not charged for estimated usage at the wrong rate.

This is especially important when prices go up.

Customers with working smart meters do not need to submit a reading, as their bill is calculated automatically.

About six million households have prepayment meters, according to the latest Ofgem figures.

Prepayment customers were previously charged more than those who settle their bill by direct debit but now pay slightly less.

Between 1 January and 31 March 2026, the typical annual bill for prepayment customers is £1,711.

Many prepayment meters have been in place for years, but some were installed more recently after customers struggled to pay higher bills.

Rules introduced in November 2023 mean suppliers must give customers more opportunity to clear their debts before switching them to a meter. They cannot be installed at all in certain households.

Fixed-price deals are not affected by the energy price cap, which changes every three months and can rise and fall.

They offer certainty for a set period – often a year or longer – but if energy prices drop while you are on the deal, you could be stuck at a higher price. You may also have to pay a penalty to leave a fixed deal early if you change your mind.

Ofgem, the energy regulator, says customers who want the security of knowing what their bill will be should consider moving to a fixed deal. However, it says they should make sure they understand all the costs.

Martin Lewis, founder of Money Saving Expert, recommends checking whole-of-market energy price comparison sites to help find the best deal.

Ofgem also controls standing charges, which are a fixed daily fee to cover the costs of connecting households to gas and electricity supplies. These vary slightly by region.

Between 1 January and 31 March 2026, standing charges will typically be 55.75p a day for electricity and 35.09p a day for gas.

Campaigners have long argued that standing charges are unfair because they make up a bigger proportion of the bill of low energy users.

In response, Ofgem said that by the end of January 2026, it wants all energy firms to offer at least one tariff that has a low standing charge but a higher cost per unit of energy.

The regulator said this would give some customers more choice and control but acknowledged it would not be suitable for everyone.

Charities, campaigners and the suppliers’ trade body criticised the proposal for just shifting the cost from one part of the bill to another rather than cutting it.

Suppliers must offer customers affordable payment plans or repayment holidays if necessary. Most also offer hardship grants.

Under plans Ofgem hopes to introduce in early 2026, nearly 200,000 people on benefits could have their debts to their energy supplier canceled—as long as they have made some effort to pay what is owed.

The scheme could see up to £500m knocked off the £4.4bn currently owed to suppliers. But covering the cost will require an extra £5 being added to everyone’s gas and electricity bill.

A number of existing government schemes also help people on low incomes with their energy bills.

The Household Support Fund, which was introduced in September 2021 to help vulnerable customers, has been extended until March 2026.

The Warm Home Discount scheme is also being overhauled.

From winter 2025, anyone on means-tested benefits in Great Britain will get £150 taken off their bills, no matter what size of property they live in.

The discount will be applied automatically for people in England or Wales and some in Scotland. However, those on a low income in Scotland will need to apply via their energy supplier. Letters are being sent to people with information on the discount.

The Fuel Direct Scheme lets people repay an energy debt directly from their benefit payments.

About nine million pensioners will also get the Winter Fuel Payment in 2025/2026, worth £200 or £300, after a government U-turn over eligibility.