UK energy price cap to increase by 4 percent in October

The British energy regulator Ofgem announced a 4 percent increase in the domestic energy price cap effective from October 1 to December 31, 2026. The adjustment will raise the average household bill by £60, bringing the total to £1,723. This change will affect approximately 22 million households currently on variable tariffs, representing about 65 percent of the UK's customer base.

The increase is primarily driven by rising wholesale gas costs, which have doubled since the onset of US military action against Iran on February 28. This geopolitical conflict has significantly disrupted shipping through the Strait of Hormuz, a critical transit route for global liquefied natural gas. The price hike undermines efforts by Prime Minister Andy Burnham to alleviate cost-of-living pressures, effectively negating recent tax relief measures on electricity bills.

Energy consultancy Cornwall Insight warns that this rise marks the highest per-unit levels in three years, with further increases projected for January 2027. Market instability is exacerbated by multiple factors, including uncertainty regarding the Middle East conflict, European summer heatwaves, supply disruptions in Norway, and high demand from Asia. Ofgem maintains that the cap remains necessary to protect consumers from volatile market shifts, though the outlook for winter remains challenging.