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Energy price caps, peaks and troughs
As most people are by now aware, every quarter the energy regulator, Ofgem, updates the energy price cap for the months ahead. This has an effect on how much you pay for the energy you use at home if you are on mains gas or electricity supply. It all sounds fairly straightforward, but there are a few important points to note.
Typical!
From October, the energy price cap will raise by around £60/year for the typical household… but how much energy does a typical household use, you ask? This is referred to as typical domestic consumption value, or TDCV, which has been changed as of July 2026 to reflect a trend of reductions in household consumption figures.
Essentially, the price cap is modelled on 3 domestic scenarios as depicted to the left, being high, medium and low use, depending on size and occupancy. In order to work out a typical household’s bill the regulator calculates a typical household’s usage and, in the UK, ours is falling.
From 2023 a typical, medium UK household was projected to use 11,500kwh in gas and 2,700kwh in electricity per year. From July 2026, this has been changed to 9,500kwh and 2,500kwh respectively, reflecting a longer term trend - total domestic energy use has reduced by 18% for electricity and 32% for gas since 2005!
In order to help consumers compare one quarter to the other, the new TDCV rate has been applied to last quarter’s calculations - the typical dual fuel household bill will rise from its current figure of £1,663 per year to £1,723 from October, but if calculated against the old TDCV rate (2023) this number would have been £1,862 rising to £1,935. Note that, at the energy price cap’s peak, the median home’s costs would have been £2,500 in 2022 during the height of the energy crisis.
According to the consultation on increasing the TCDV, the reduction in overall domestic energy usage is mostly due to changing consumer behaviours motivated by pricing and the cost of living, though other factors such as more efficient boilers, increased insulation, and higher EPC ratings have helped to reduce domestic energy intensity as well. Another reason for reduced energy usage was the milder winters we have been experiencing due to climate change, though no mention was made of potentially increased energy usage for cooling as our summers become hotter and drier.
Rate pricing
Despite the general trend going downwards for energy consumption, the price per unit of energy (kwh) is going up based on a number of global factors, such as conflicts driving up wholesale costs by 11% over the last three months. In this round, the price per kwh is increasing by 0.21p and 0.67p for electricity and gas respectively, then the daily standing charge is decreasing by 2.63p/day for electricity and increasing by 0.64p/day for gas. The government has recently dropped VAT from electricity prices, so electric only properties may only see an increase in their bills of around 1%, vs 8% increase for dual fuel customers. Amongst all these changes, benchmarking and comparison becomes difficult, especially given the changes to TCDV too. Confused? We were too! Thankfully, Ofgem have provided a graph below, showing how the price cap has worked in relation to some typical income markers.
What isn’t covered by the price cap?
As users of oil for heating purposes can attest to, non-standard fuel costs are not affected by the price cap - over the last few years, users of domestic heating oil have been faced with fuel bills that have nearly doubled since 2015, again due to global conflicts and supply pressures.
Residents on fixed term contracts are also unaffected, though fortunately the 5% saving on VAT for electricity will be applied to their bills by suppliers. As global energy prices are due for continued volatility, it might be worth assessing your options with your supplier - there
are some deals on the market for nearly £200 less than the October price cap rates as of August 2026! However, do bear in mind that even if the energy price cap falls, your fixed term contract will retain the same pricing for its duration.
Lastly, business energy rates are not included in the energy price cap and there is no plan to mirror the domestic scheme in the commercial sector. This leaves them particularly open to volatility in the markets as energy prices are set by the most expensive form of fuel, usually gas, in a process known as marginal pricing. As the UK continues to produce more of its energy from low-carbon domestic alternatives, NESO (National Energy System Operator) forecasts gas will only set the pricing 30% of the time by 2030 and represent just 5% of the fuel mix required for national energy generation.
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