Energy Bills Fall, but Forecasts Signal an End to Major Reductions in the Short Term

Ofgem has today confirmed the Default Tariff Cap for April–June 2026 at £1,641 per year for a typical dual‑fuel household1. As forecast, this represents a substantial reduction from the current level, with bills falling by £117 per year, or 7%. Early indications from Cornwall Insight’s forecast for July suggest the price cap will remain relatively steady, rising to £1,645 a year from July.

April’s price cap drop has been driven by several factors – most notably the measures announced in November’s Budget to shift 75% of Renewables Obligation (RO) costs from customer bills into general taxation and the decision not to extend the Energy Company Obligation (ECO) beyond March 2026, as well as a comparatively modest easing in wholesale prices during the period over which the cap was set.

Cornwall Insight’s July forecast shows prices remaining relatively close to April’s level. While policy – and network - costs will continue to play a significant role in shaping household bills, wholesale markets have become increasingly volatile since the beginning of the year.

Unlike the April cap, which benefited from comparatively lower wholesale prices near the end of 2025, the July cap is being set against more turbulent market conditions. Escalating geopolitical tensions – particularly related to American foreign policy in the Middle East and potential disruption to liquefied natural gas (LNG) supplies through the Strait of Hormuz – could push the cap upwards again.

The UK's current reliance on global natural gas markets means that wholesale price volatility is inevitable, and this exposure can carry a real cost for households. This underscores the ongoing need to accelerate the transition to secure, sustainable, locally sourced energy. The Government will face the difficult challenge of balancing the upfront policy costs required to deliver the transition against the long-term benefits of such a move.

Figure 1: 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 Service

Note: 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.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight:

“Today's reduction in the cap will bring real relief to households after a prolonged period of pressure on their energy bills. However, our early view for July suggests that this is where the big falls stop. Policy and network costs are holding relatively steady over the next quarter, but recent volatility in the wholesale market risks pushing prices upwards.

“Wholesale costs aren’t the biggest part of the bill, but they are the most volatile. The energy crisis made that clear, as global prices surged and households and businesses were left to deal with the fallout. While forecasts are remaining stable for now, energy markets have a habit of reacting rapidly to global events. Ongoing geopolitical tensions and the potential impact on key global gas supply routes underline the risks and variables at play, and July’s cap could go either way.

“The only real long-term answer is reducing our dependence on those markets altogether, and that means maintaining the transition to homegrown, sustainable energy. There are real upfront policy costs involved, and it's right that there is scrutiny over who pays and how fairly that burden is shared. But those costs must be weighed honestly against the alternative – continued exposure to the kind of wholesale price shocks that could cause bills to rise. That is a balance the Government must get right."

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.