Ofgem Announces Typical UK Annual Energy Bills Will Rise by £221 From 1 July
Energy Price Cap Rises Amid Middle East Conflict
Typical annual energy bills for households in England, Wales, and Scotland will increase by £221, reaching £1,862 from 1 July, according to the regulator Ofgem. This 13% rise directly reflects the volatility in wholesale oil and gas markets, exacerbated by the US-Israel war with Iran and its impact on vital shipping lanes.
The energy cap determines the maximum unit price for gas and electricity charged to customers on standard variable tariffs, covering approximately 33 million households. Gas prices will be capped at 7.33 pence per kilowatt hour (kWh), up from 5.74p, while electricity prices will reach 26.11p per kWh, an increase from 24.67p. These figures apply to dual-fuel households paying by direct debit. Customers using standard credit will see typical annual bills rise to £2,005, and prepayment customers to £1,812.
Revised Usage Estimates and Future Outlook
Ofgem has adjusted its 'typical' annual energy consumption estimates downwards, now assuming 9,500 kWh of gas and 2,500 kWh of electricity, reflecting household efficiency gains and reduced usage due to high prices. Under these new assumptions, the typical annual bill from 1 July would be £1,663, representing a 12% increase from the previous period's equivalent of £1,490.
Standing charges, the fixed daily fee for energy supply connection, remain largely unchanged. However, campaigners continue to criticise these charges as disproportionately affecting low-energy households. Ofgem has proposed that suppliers offer at least one tariff with a lower standing charge, though this has been met with scepticism by charities, who argue it merely redistributes costs rather than reducing them.
Ofgem's interim chief executive, Tim Jarvis, has indicated that the energy price disruption stemming from the Iran war could be protracted. The level of the next cap, due on 1 October, will largely hinge on the resolution of the conflict and the reopening of the Strait of Hormuz, a crucial global shipping route for oil and gas that Iran has effectively blocked since 28 February.
Support Measures and Debt Crisis Deepen
Approximately 40% of households on fixed-term energy deals are unaffected by these cap changes. While fixed deals offer price certainty, customers risk being locked into higher rates if wholesale prices fall. Ofgem encourages considering fixed deals for future cap protection but advises understanding all associated costs, including early exit penalties.
The government has removed charges related to the Energy Company Obligation and shifted 75% of renewable energy project funding to general taxation, aiming to alleviate pressure on bills. However, costs for maintaining and upgrading energy network infrastructure are set to rise, with an additional £108 expected to be added to typical annual bills by 2031 to fund a £28bn investment in electricity and gas grids. Further changes to electricity pricing are also planned by spring 2027 to decouple bills from gas price spikes.
Heating oil, which is not covered by the energy cap, has seen significant price increases, particularly in Northern Ireland where nearly two-thirds of households rely on it. A £53m government support package has been announced for vulnerable rural households using heating oil.
The UK faces a deepening energy debt crisis, with arrears in England, Wales, and Scotland reaching £4.4bn between April and June 2025, a £750m increase year-on-year. Over one million households currently have no arrangement to repay their debts. Ofgem plans for 2026 include a scheme to cancel up to £500m of debt for nearly 200,000 benefit recipients who have made repayment efforts, though this would necessitate an additional £5 charge on every gas and electricity bill. Government schemes like the Household Support Fund and Warm Home Discount continue to provide limited relief.
