Energy bills are due to drop in April, but that may only be temporary respite as the Iran war pushes up prices.
Ofgem’s energy price cap will drop by 7% in April, taking typical gas and electricity bills for those on a standard variable tariff down from £1,758 to £1,641 per year.
In an “unusual move”, households on fixed energy deals will benefit from price drops due to the government scrapping the Energy Company Obligation portion of bill calculations, said the HomeOwners Alliance.
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But wholesale energy prices are starting to “shoot up again”, said MoneySavingExpert, which is bad news for households in the coming months.
How are energy bills set?
Energy companies charge households for how much gas or electricity they use, based on a measurement called kilowatt hours.
You could be on a fixed-rate tariff that “sets the cost of energy for a certain amount of time”, such as one year, said CompareTheMarket. Many households are on variable tariffs that can “go up or down according to the market”.
The cost of a variable tariff is linked to industry regulator Ofgem’s price cap.
What is the energy price cap?
The price cap sets a limit on how much suppliers can charge for each unit of energy, and your daily standing charge if you are on a standard variable tariff.
The price cap is calculated every quarter by Ofgem based on a “range of factors”, said uSwitch, including wholesale and network costs. It is set to drop to £1,641 per year for a typical household paying by direct debit, a yearly saving of around £117.
But this is only the average, and “your bills might look very different depending on your circumstances”, said Which?.
This will relieve some of the pressure from high energy prices, but it is “probably going to be short-lived” due to the US-Iran war, said MoneyWeek.
The April price cap reduction “reflects the relatively low wholesale prices” between December 2025 and February 2026, said Forbes, and oil and gas prices have since “increased dramatically”.
Will energy bills rise in 2026?
Wholesale prices have “spiked” in recent weeks, said Octopus Energy, due to the Iran war, which has sharply reduced oil and gas supplies through the Strait of Hormuz.
Forecasts from energy consultancy Cornwall Insight suggest the price cap could increase by £322 in July to £1,963, pushing up bills. It reflects the surge in oil and gas prices.
Similarly, E.ON Next is forecasting that the July price cap will rise by £314 to £1,955 per year.
EDF Energy also predicts that “market volatility will flow through to the price cap”, and that it will rise to £1,937 in July, and above £2,000 later this year.
Higher energy prices will also impact when the Bank of England next cuts interest rates and it has already warned that the rising costs mean inflation is “higher than we expected, at least in the short term”.
Is there support available for rising energy bills?
Chancellor Rachel Reeves has said the government will offer “targeted rather than universal support”, said The Independent.
You may already qualify for the Warm Home Discount, worth £150, if you are on pension credit or other benefits or Winter Fuel Payment, worth £300.
Energy suppliers may offer payment holidays or hardship grants, such as Octopus Energy’s Octo Assist and the British Gas Energy Trust fund from British Gas.
Help should also be available from charities such as Citizens Advice “if you’re struggling to pay for energy or think you may get into difficulty”, said Ofgem.