What Ofgem confirmed today
Ofgem announced the Q4 2026 energy price cap on 26 August. From 1 October to 31 December, the typical Direct Debit dual-fuel bill rises to £1,723 a year, up £60, or 4%, from £1,663. On the older 2023 benchmark, the equivalent figure is £1,935, up from £1,862.
The cap protects around 22 million households on default tariffs.
Why gas rose and electricity barely moved
Wholesale gas costs rose 11% over the assessment window, driven mainly by the Middle East conflict, pushing gas bills up 8% this quarter.
Electricity, by contrast, tells a different story. The government removed VAT from domestic electricity bills for 1 October 2026 to 31 March 2027, while gas continues to carry 5% VAT. That cut nearly offset the equivalent wholesale-driven rise in electricity costs, leaving electricity-only bills up by less than 1%.
Ofgem states that without the VAT removal, the Q4 cap would have been around £45 higher, near £1,768, and that saving is already built in and should not be subtracted again.
The real quarterly bill impact
The annualised headline hides a seasonal effect: Q3's £1,663 cap fell in the lowest-demand quarter of the year, while Q4's £1,723 cap falls in the second-highest, behind only Q1.
| Fuel | Q3 2026 (actual quarter) | Q4 2026 (actual quarter) | Change |
|---|---|---|---|
| Electricity | £203 | £227 | +£24 (+12%) |
| Gas | £103 | £268 | +£165 (+160%) |
| Total quarterly spend | £306 | £496 | +£190 (+62%) |
| Monthly equivalent | £102/month | £165/month | +£63/month |
Gas drives nearly all of it, since gas usage jumps from 11% to 32% of the annual total between the two quarters, while electricity's real increase is a milder 12% thanks partly to the VAT cut. A household budgeting off the £60-a-year headline is likely to be caught out by a bill roughly £63 a month higher than the quarter before.
Cap levels by payment type
| Payment method | Q3 2026 | Q4 2026 | Change |
|---|---|---|---|
| Direct Debit | £1,663 | £1,723 | +£60 (+4%) |
| Prepayment meter | £1,620 | £1,678 | +£58 (+4%) |
| Standard credit | £1,790 | £1,861 | +£71 (+4%) |
Prepayment remains the cheapest payment method, saving approximately £45 a year relative to Direct Debit.
What the headline misses
VAT and wholesale gas dominate the coverage as the biggest numbers, but Ofgem's cap is built from dozens of smaller allowances, several of which moved more sharply than the headline this quarter.
| Cost component | Q3 2026 | Q4 2026 | Change |
|---|---|---|---|
| Allowed supplier profit (EBIT) | £21.40 | £22.46 | +£1.06 (+5.0%) |
| Smart meter data charges, electricity | £15.57 | £16.26 | +£0.69 (+4.4%) |
| Smart meter data charges, gas | £11.65 | £12.23 | +£0.58 (+5.0%) |
Allowed supplier profit jumped nearly five times faster than the previous quarter's move: £21.17 to £21.40 was a £0.23 rise in Q3, while £21.40 to £22.46 is a £1.06 rise in Q4. Ofgem resets this cost-of-capital allowance every October, which is why the increase lands in the same quarter as the headline cap.
Smart meter data charges also rose faster than general cost inflation, up around 4 to 5% on both fuels. Stacked together, the profit allowance and the two data-charge lines add roughly £2.33 a quarter, invisible in any single headline number.
Cornwall Insight's forecast and Ofgem's confirmed figures landed within about 0.3% of each other, suggesting wholesale prices had stabilised before the window closed. That, however, does not guarantee an equally calm Q1 2027.
Ofgem's own release notes that fixed tariffs are available at £100 or more below the October price cap. Accordingly, current deals on the SwitchPilot tariff tracker are worth comparing before deciding.