Price Cap January 2026: What It Means for Your Bills

The next energy price cap will start on 1 January 2026. This cap will cover bills for January, February, and March. These are the coldest months and a time when energy use is high. Analysts say that Ofgem may bring the price cap down a little from what it is now. But many households will still get high energy bills because people use more energy in winter, and the cost is high in real terms.

This guide tells you about the new predictions for energy prices. It looks at how the unit rate, standing charge, and direct debit costs could change for the average household. You can also read if the January 2026 cap will be good news for most people at that time.

We go over fixed tariff choices, talk about how wholesale energy prices affect what you pay, and give practical ways for you and your family to manage energy use this winter.

If you want to know if you could pay less on your bill, you can compare energy prices. This helps you find lower fixed tariffs that are on offer right now.

What is the current energy price cap?

As of November 2025, the current Ofgem price cap is in place.

• £1,755 per year is what an average household pays by direct debit.
• These numbers show what most people use:
  • 2,700 kWh of electricity
  • 11,500 kWh of gas

Standing charges and unit rates under the current cap

Below, you can find a rough idea of what the usual unit rate and daily standing charge are for Great Britain, using numbers from Ofgem.

Standing charges stay high because they take care of network costs, government levies, and help for people in need through the warm home discount scheme. They also cover debt costs for the whole industry.

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What are analysts predicting for the January 2026 price cap?

Energy analysts think that Ofgem will soon say there will be another small drop in the default tariff price cap.

Latest predictions for the January 2026 cap

Based on forecasts from UK energy suppliers:

The final number will probably be around £1,735. This is a little less than the current figure, which is £1,755.

Why the predicted drop?

Analysts point to:

• Lower wholesale energy costs in the gas and electricity markets
• Less UK gas storage pressure
• A more steady LNG supply
• The smaller effect of the energy crisis on the unit of gas prices

The drop is small because wholesale market prices are still high when you look at what they were before 2021. Also, government policy, network charges, and the Ofgem methodology make standing charges stay up.

Is the January 2026 price cap drop good news for energy customers?

Yes — but with important limitations

The cap will drop a bit, but winter weather brings the following things:

• Energy use goes up a lot in January and February.
• Homes that heat their space for more hours each day will still get higher bills in the end.
• A cut of about £20 a year does not make up for how much people use during winter.
• The price cap is not the most anyone pays — what you spend depends on how much energy your household uses.

In real terms, most households will still have to pay more for bills over the winter, even with the new cap.

Why usage matters more than the cap

The cap controls:

• Unit rate (the price of each kWh)
• Standing charge
• Daily maximum a supplier can ask for from a typical household

But your actual bill is:

unit rate × energy use
+
standing charge × number of days

Even a little bit more use, like turning up the heat, can make the drop we expect not happen.

What is driving changes to the January 2026 price cap?

Factors pushing the cap down

• Wholesale gas prices are lower now than they were at the start of 2025.
• Global LNG supplies are steady.
• Demand in Europe is not as strong.
• More wind energy is being made, so people do not need gas-powered plants as much.

Factors keeping the cap higher than pre-crisis levels

• The network needs work that will last for many years.
• The Sizewell C nuclear project has money problems.
• There are costs that come from rules and things meant to help the world.
• Suppliers have debt they need to pay off.
• Ofgem changed how they set the price cap. Now there is a “safety net” in place. This helps stop suppliers from failing.

Energy regulator Ofgem says the cap shows the amount energy suppliers need to cover their costs in the wholesale market. It helps make sure customers pay a fair price.

Will standing charges change in January 2026?

Standing charges still worry many people and groups speaking up for them, like Citizens Advice.

Standing charge expectations

• Some places may see the standing charges go down a little.
• In other places, the charges may not really change.
• The electricity standing charges are still some of the highest in Europe.

Standing charges apply even if you do not use any energy. These charges help pay for things like keeping meters working, network costs and services that everyone gets.

What should energy customers do ahead of the new cap?

1. Consider switching to a fixed tariff

Many suppliers now give fixed energy tariffs. These are priced lower than both the price cap now and what people think it will be later. A lot of people find these deals to be really good.

• Households that want to know the price.
• People who use a lot of energy in winter.
• Customers who feel worried about what will happen to prices later.

Now is the right time to look at the market and compare energy prices. This can help you find a cheaper fixed tariff.

2. Reduce your energy use with small changes

Practical ways to lower winter consumption include:

• Turning the thermostat down by 1°C can help you save some money on your energy bill. A small change like this often makes a big difference over time.
• Reducing tumble dryer use is a good way to cut down on how much power you use at home. Try to dry your clothes by hanging them up when you can.
• Using eco or cold cycles on your washing machine is another simple move. These settings use less water and power, so they are better for your bills and the planet.
• Improving insulation in your home will keep warmth from getting out. This means you need to use less heat to warm your house, which can be good for both you and your wallet.
• Managing heating schedules more efficiently will help you use energy only when you need it. A good plan for when your heating comes on and off can save you a lot throughout the year.

3. Check if you qualify for financial assistance

Support includes:

• Warm Home Discount
• Emergency credit for prepayment users
• Supplier hardship funds
• Local council energy grants

4. Review your meter type

Your tariff may depend on whether you use:

• Standard credit
• Direct debit
• Prepayment meter
• Smart meter (SMETS1 or SMETS2)

Smart meters can help you get access to cheaper time-of-use tariffs. This means you may pay less for your energy at certain times. A smart meter makes it easier for you to see when power is cheaper. This helps you use your energy in a better way. It can be good for people who want to save money.

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How does the energy price cap work?

What the cap covers

The cap limits:

• Unit rate is the price you pay for each unit of electricity and gas. This is set by your supplier. You see it on your bill.
• The daily standing charge is a flat fee you pay each day. It does not matter how much you use. This helps keep the gas and electric supply working.
• The total cost for a typical household comes from both the unit rate and the daily standing charge. These two add up to make your monthly bill.

What the cap does not cover

• Your total bill
• Bulk discounts
• Some specialist tariffs
• Northern Ireland (which has its own energy market)

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Why does Ofgem set the cap every three months?

Ofgem reviews the cap quarterly based on:

• Wholesale market prices can change at any time. They affect how much you pay for energy. The price to buy energy goes up or down. This is important for the company and the people who buy energy.
• Network cost changes matter too. The cost to run the energy wires, pipes, and systems changes with time. These changes may add to how much you pay. The cost can go up or down.
• Government levies are taxes or fees set by the government. When these go up, you may see your bill go up too. It is good to know that this is not set by the company, but by the government.
• Forecast energy consumption means they try to guess how much energy people will use. If they think people will use more energy, the cost can change. A high need for energy may mean higher prices.
• Supplier operational costs are the costs that the energy company pays to run their business. These include paying staff, maintaining tools, and other expenses. If it costs more for them to work, prices may also go up for you.

Who is the price cap designed to protect?

The cap is a “safety net” for:

• Customers who are on variable tariffs
• People who have the default tariff
• Households that have not switched to another supplier

It is there to stop suppliers from charging too much to customers on standard variable rates. This helps people pay fair prices.

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How much could the new cap change your bill?

Below is an example that shows how a regular home can have dual fuel.

Example: Typical household on a standard variable tariff

Example monthly comparison

Savings be small when you look at how much people use energy in winter. The increase in winter use is more than the savings.

Why wholesale energy prices matter for the cap

Ofgem’s price cap is heavily influenced by:

• The wholesale cost of gas is a big part of electricity costs.
• Forward market contracts can affect the price we pay for energy.
• Trouble between countries can cause prices to go up or down.
• The price of LNG can also change, and this moves electricity costs.

Wholesale markets stay higher than they did before the crisis because:

• There are problems happening in the world right now.
• Countries are trying to get more LNG cargoes.
• Production in the North Sea has gone down.
• The power made from renewables now changes more than before.

Cornwall Insight is the top energy consultant in the UK. It says that there will be ups and downs in wholesale energy prices for several years. This change will be in the market for a long time.

Are fixed tariffs cheaper than the price cap right now?

Yes — in many cases.

Multiple suppliers now have fixed tariffs. They cost £150–£300 less than what people expect the January 2026 cap will be. These deals usually include:

• You get lower unit rates
• You pay lower or equal standing charges
• There are no price changes in the middle of your contract

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What factors might affect future price caps?

Energy prices may rise or fall depending on:

• Global gas market stability
• UK winter temperatures
• Renewable generation output
• Government policy and levies
• Ofgem methodology updates
• Storage capacity improvements
• Costs tied to nuclear projects like Sizewell C

The UK’s energy regulator still says that “up-and-down prices are the biggest risk for the future”.

Does the January 2026 price cap impact all UK households equally?

No, the energy price cap in January 2026 will not be the same for every home in Great Britain. The price cap puts limits on unit rates and standing charges. How much these limits affect people will depend on a few things:

Household energy usage

Homes that have more energy use—like when there are large families, or the place does not have good insulation, or you use electric heating—will still have higher bills in winter. Even if the cap is set a little lower, you may not save much. The cap is made for a typical household. It does not match how much energy each person or home uses.

Regional variations

Electricity standing charges and unit rates are not the same in every place. They can be different from one region to another. For example:

• People who live in country areas often pay more for distribution costs.
• In some places, daily standing charges are higher. This is because these places need network infrastructure that costs more.

This means that two homes that use the same amount of energy can still get bills for different amounts, even if they both fall under the same national cap.

Type of tariff

The price cap applies only to:

• Standard variable tariffs
• Default tariff customers
• Most people who pay using direct debit
• Standard credit users, but they pay a bit more for each unit

It does not apply to:

• Fixed tariffs
• Time-of-use tariffs
• Some smart meter export tariffs
• Prepayment rates in Northern Ireland (which has a different regulatory system)

Payment method

Standing charges and unit rates can be very different from one company to another.

• Direct debit
• Standard credit
• Prepayment meters

Prepayment customers usually pay more for each unit of energy. Ofgem has made this difference smaller in the past few years.

Property type and heating system

Homes using:

• Electric heating
• Old boilers
• Poor insulation
• Heat pumps used inefficiently

People might get much bigger bills, even with the new cap.

The price cap is a national reference point. But the way households feel the effect of it is not always the same. It depends on their own situations.

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How does the January 2026 price cap compare to international standards?

Energy prices in Great Britain still be high when you compare them with other countries. This stays true even with the price cap going down to about £1,735.

Europe comparison

Several countries in Europe have lower costs for electricity and gas because:

• They use nuclear or hydro power more than others.
• They set up their network cost in a different way.
• Government policy helps pay for energy bills more.

Countries like France and Norway have lower electricity unit rates for homes. In France, the government has run nuclear power for many years. This helps keep prices steady. It also means they do not change much when wholesale market prices go up or down.

Countries paying more

Some places in Europe, like Germany and Italy, often have to pay more for electricity. This is because they depend a lot on gas that comes from other countries. They also pay extra to help support renewable energy.

Why the UK sits higher than many countries

Several structural factors influence UK pricing:

• The UK depends a lot on imported gas to make electricity.
• There are costs from old deals in the network that carry on for many years.
• The government asks for higher payments to help lower carbon.
• The UK is open to changes in the global LNG spot market, which can affect prices.
• There is not much space in the UK to store gas, so it can be hit harder by sudden changes.
• Making nuclear plants bigger, like Sizewell C, means there will be more costs.

International comparison (illustrative)

The UK has some of the highest standing charges for electricity in Europe. This makes the UK less able to compete with other countries, even if the unit rates go down with the new cap.

Why comparisons are difficult

Each country has its own way to measure things.

• Network costs
• Environmental levies
• VAT
• Supplier margins
• Government support schemes

Still, analysts say Great Britain is on the higher side when it comes to global energy prices. This means the January 2026 cap is a good step. But it does not completely fix money worries for many homes.

Correct as of 21 November 2025

FAQs About the January 2026 Energy Price Cap