Blog: What does the price cap rise really mean for household energy costs?

The price cap is rising by 4% on 1 October. An increase as winter approaches is bad news for households already struggling to afford the essentials. 

The headline figure indicates the direction of prices, but it does not show what every household will pay. It is based on an assumed level of typical consumption, which Ofgem has reduced as average energy use has fallen. Some of that reduction reflects improvements in energy efficiency, but the scale and speed of the change also point to households rationing their energy in response to persistently high prices.  

There is a sound reason for keeping the benchmark up to date, but the change makes comparisons over time harder and can obscure how much it now costs to buy the same amount of energy and maintain a warm, healthy home. 

By holding consumption constant across a selection of profiles, we can see more clearly how the October 2026 rates compare with those in place before the household energy crisis began in 2021, what costs look like for households in less efficient homes, and where they could be heading in January. 

This gives a better indication of the experience of fuel-poor households living in homes that have not received energy-efficiency improvements and may require more energy than average to maintain a safe and healthy temperature. 

What has happened to typical consumption? 

The price cap limits the unit rates and standing charges applied to default tariffs. It does not limit a household’s total bill. To produce the familiar annual figure, Ofgem applies those rates to Typical Domestic Consumption Values, or TDCVs. 

The medium-use benchmark has fallen twice since 2021: 

Ofgem needs its benchmark to reflect changes in average use. However, falling consumption should not automatically be read as evidence that homes need less energy or have become significantly more efficient. 

Since the previous TDCVs were set in 2023, Ofgem’s medium-use benchmark has fallen by 7% for electricity and 17% for gas. Ofgem identifies several likely contributors to falling demand, including energy-efficiency improvements, climatic changes and behavioural responses to affordability pressures. The reductions cannot therefore be attributed to a single cause.  

However, the sharpest recent falls in energy use coincided with the household energy crisis. Resolution Foundation analysis found that 2022 and 2023 accounted for 36% of the reduction in electricity consumption and 39% of the reduction in gas consumption recorded since 2010. In 2022, 79% of neighbourhoods reduced gas use by at least 10% and electricity use by at least 5%, with poorer, colder and less energy-efficient areas making some of the largest reductions in gas use. This provides strong evidence that lower measured consumption can reflect significant rationing of essential energy, rather than improvements in energy efficiency or reduced energy need alone. 

Successive reductions in TDCVs also mean that headline price-cap figures from different periods no longer show the cost of buying the same amount of energy.  

To make a like-for-like comparison, National Energy Action has applied the rates from different price-cap periods to a fixed set of indicative consumption profiles. 

Comparing energy costs like for like 

We have selected October 2021 and April 2022 as historical comparison points because they capture the beginning of the household energy crisis and the first major crisis-era increase, when the headline price cap rose by 54% to £1,971. 

These periods are compared with the October 2026 rates and Cornwall Insight’s latest forecast for January 2027. 

The analysis uses four illustrative consumption profiles associated with different EPC bands. These are intended to illustrate how energy requirements can vary between more and less efficient homes, rather than to represent every household within a particular band. 

Actual consumption varies according to factors including property characteristics, household circumstances and heating behaviour. Some low-income households also use less energy than they need because they cannot afford adequate warmth. Holding the consumption profiles constant nevertheless allows us to isolate the effect of changing energy prices. 

National Energy Action analysis applying Great Britain average direct-debit unit rates and standing charges to fixed annual consumption profiles. The EPC-linked profiles are indicative. January 2027 figures apply Cornwall Insight’s published national-average forecast rates and are subject to change. Figures are annualised, rounded to the nearest pound and shown in cash terms without adjustment for inflation. 

For a household using the same amount of energy, or needing that amount to maintain a warm and healthy home, the October 2026 rates produce a higher annual bill than the April 2022 cap. 

The April 2022 cap marked the first major crisis-era increase in household energy bills, rising by 54% to £1,971. When Ofgem announced the increase in February, the Government responded with a £150 Council Tax rebate for eligible households in England and a planned £200 repayable energy-bill discount. The latter was subsequently doubled and converted into a non-repayable £400 grant through the Energy Bills Support Scheme. 

Although the October 2026 headline cap is below the April 2022 figure, the October rates produce slightly higher annual costs when applied to the same levels of consumption. 

At fixed consumption, the October rates also leave annual costs around 55% higher than before the crisis. These are cash comparisons and have not been adjusted for inflation, so the increase would be smaller in real terms. 

Households with higher energy requirements face the greatest burden. At October 2026 rates, annualised costs range from £1,996 for the indicative EPC C profile to £2,921 for EPC F/G.  

For low-income households living in inefficient homes, the figures illustrate the substantial cost of maintaining a warm and healthy home. A household currently rationing its energy would have to meet these costs to use the energy it needs, while many will continue to go without because they cannot afford to do so. 

A like-for-like look ahead to January 

The outlook could worsen significantly when the cap changes again in January, just as winter places the greatest demands on household energy use. Cornwall Insight forecasts that the headline price cap will rise by 16% to £1,999 for a typical dual-fuel household, the largest increase since January 2023. The forecast uses Ofgem’s current Typical Domestic Consumption Values of 2,500 kWh of electricity and 9,500 kWh of gas. 

Applying the forecast rates to our fixed profiles produces annualised costs ranging from around £2,300 for the indicative EPC C profile to more than £3,400 for EPC F/G.  

At the consumption level used to present the original £2,500 Energy Price Guarantee, the forecast rates would produce an annualised bill of around £2,360. The £1,999 headline therefore does not show how close energy costs are moving towards previous crisis levels for households that still need the same amount of energy.  

If the January price cap increases as forecast, it would deepen hardship significantly during the coldest part of the year. Households already rationing energy could face even greater pressure to go without adequate warmth, while those unable to reduce their consumption would face sharply higher costs and a greater risk of debt. 

What should the Government do? 

The Government should not wait for prices to approach previous crisis levels before acting. Energy debt has continued to rise, household finances remain fragile and many people continue to suppress essential energy use. 

First, it should strengthen support with ongoing bills this winter. The Warm Home Discount should provide tiered rebates, with the greatest support directed towards households facing the largest affordability gaps, including low-income households with health-related energy needs. Support should be delivered using the best available data and delivery arrangements this winter, even if targeting cannot initially be perfect. 

Second, Ofgem’s Debt Relief Scheme should provide a genuine reset for indebted households in payment difficulty. To do so it must be enabled to proceed and backed by sufficient Treasury funding. 

Third, the Government must accelerate improvements to the least efficient homes through the Warm Homes Plan. Better insulation reduces the energy needed to maintain a safe temperature on an enduring basis. However, future upgrades cannot replace immediate bill support for households facing another difficult winter. 

Updating typical-consumption values is necessary, but falling consumption should not mask the reality of unaffordable energy. Many households are already using less energy than they need, while those unable to reduce their consumption face potentially insurmountable costs to maintain a warm, healthy home. 

Government support must respond to the cost of achieving adequate warmth, rather than assuming that households can continue reducing consumption without consequence.