April 2026 Price Cap: Your Bills Are Dropping - But Not by as Much as They Say

From SwitchInsights - part of SwitchPilot

The Headline

Ofgem confirmed the Q2 2026 price cap at £1,641 per year for a typical household on Direct Debit - a fall of £117 from Q1's £1,758. That's a meaningful drop, and bigger than most forecasters expected. It's also the first significant fall since the energy crisis sent bills spiralling in 2022.

But before crediting the government's intervention entirely, it's worth pulling the drop apart. Because the picture is more complicated - and more interesting - than the headlines suggest.

Two Things Drove the Fall

The £117 reduction reflects two separate forces pulling in different directions:

The budget intervention (ECO ending, 75% of the Renewables Obligation moved to general taxation) saves around £134 on the price cap. But this is partially clawed back by a significant rise in network charges under RIIO-3, which adds roughly £40–42 to standing charges from April. Net policy saving: approximately £92.

Wholesale prices also moved favourably - contributing the remaining ~£25 of the drop. This part doesn't come with a political announcement, but it's real money off your bill.

What the Government Actually Changed

From 1 April, two levies that have long sat on energy bills are being restructured:

The ECO scheme - the main programme funding home insulation for low-income households since 2013 - is ending completely. It cost about £59/year per household on their bill. That saving is genuine: the programme is gone (for now), and so is the levy.

The Renewables Obligation - the mechanism that has required suppliers to source a portion of their electricity from renewables, costing over £8.5 billion a year in total - has had 75% of its cost shifted from energy bills to general taxation. That's worth around £88/year on your bill.

But here's the catch on the £88 RO saving: it isn't disappearing. It's moving. You'll pay it through general taxation instead of your energy bill. Whether that's better or worse depends on your income - but it's not a cut in the cost of running the renewables fleet.

The Offsetting Bad News: Network Charges

At the same time as these levies were being removed, a separate set of charges was rising. Under the RIIO-3 regulatory framework that took effect from April 2026, transmission network charges increased substantially - from around £42 to approximately £62 per year for a typical household.

This is the cost of upgrading the national grid to connect offshore wind, integrate new renewables, and replace ageing infrastructure - an £80 billion investment programme you're contributing to through your standing charges. It's necessary work. But it means £20 of the bill-based policy saving is immediately eaten by network costs, before you see any benefit.

How Much of Your Bill Is Still Policy?

Even after ECO ends and 75% of the RO moves to tax, there remains a significant layer of policy costs within the Q2 price cap. This is the bit the headlines rarely mention.

The Warm Home Discount alone adds around £46 per year to non-eligible bills. The residual 25% Renewables Obligation, Feed-in Tariffs, Nuclear RAB (Sizewell C), and other levies account for the rest. In total, approximately £120–130 of policy costs remain in the Q2 cap even after the intervention.

The "What If" Picture

To understand how much policy is still embedded in your bill, it's useful to ask: what would the cap look like if further levies were also removed?

A few things stand out. First, even if the Warm Home Discount was also removed from bills, the cap would only fall by a further ~£46 - which shows it isn't the dominant remaining cost. Second, the bottom row reveals that a cap free of all social and green levies would be roughly £120–130 lower than the announced £1,641. That's the ongoing cost of funding social programmes and clean energy infrastructure through energy bills rather than general taxation.

The Gas vs Electricity Problem

Here's the angle that most Q2 coverage will miss: the saving is almost entirely an electricity saving.

That's a 10:1 ratio. For the roughly 85% of UK homes that heat with gas, this is the most important number in the entire Q2 announcement. The intervention was designed - correctly - to reduce the cost of electricity. But heating is the dominant cost driver for most households, and heating runs on gas.

The Warm Home Discount Irony

This asymmetry becomes sharper when you factor in the Warm Home Discount. The WHD is explicitly designed for households with high energy costs - and the benchmark consumption used to determine eligibility is gas-weighted, because high heating bills are the primary driver of fuel poverty.

Yet the rebate itself - £150 - comes off your energy bill, which in practice is often the electricity bill, though some suppliers apply it to gas. And the levy that funds it is spread across energy charges paid by all non-eligible customers, regardless of fuel type.

The result is a curious mismatch: the households the WHD is designed for are gas-heavy users, whose gas bills have barely changed in Q2. Meanwhile, the customers cross-subsidising the scheme through their electricity bills are getting most of the unit rate benefit from the budget intervention - but many of them heat with gas too, so their overall bill reduction is modest where it matters most: in winter.

The Seasonal Standing Charge Trap

There's one more layer to the gas vs electricity story - and it's about standing charges. Gas standing charges (~35p/day) are notably cheaper than electricity (~50p/day). At first glance, that looks like a saving for gas customers. But the seasons tell a different story.

In summer, when gas consumption falls to just 11% of annual demand, you're paying the gas standing charge for almost nothing - keeping a pipe live to a fuel you barely use. Your bill is dominated by electricity. The cheaper gas standing charge benefit is felt most in the season when gas barely matters.

Come winter, the dynamic flips hard. Gas consumption surges to 39% of annual demand in Q1 alone. This is where bills really hurt - and it's precisely where the Q2 intervention offers the least relief. A 0.35p/kWh saving on high-volume winter gas use barely registers.

What About Heat Pumps?

For a heat pump to be cheaper to run than a gas boiler, electricity needs to cost no more than roughly 3.4× what gas costs (assuming a typical heat pump efficiency coefficient of 3.4). In Q2, the electricity-to-gas ratio is still well above that threshold, though the electricity unit rate reduction nudges it slightly in the right direction.

The electricity savings in Q2 are almost entirely absent on the gas side. If the government's long-term goal is to shift homes from gas to electricity, closing this price ratio is essential - and Q2 makes a small step, but the gap remains wide.

Cap History: Where We've Come From

At £1,641, bills are meaningfully below the post-crisis peaks - but still £500 higher than the pre-crisis norm of around £1,100–1,200. For context, when the energy crisis began in late 2021, bills were capped at around £1,277. The cap today, even with the intervention, is still about 28% above that level.

The Catches Worth Knowing

It's temporary. The government's funding for the RO shift ends in March 2029, after which those costs are expected to return to energy bills. Conveniently, that's just before the next general election. What happens after 2029 is currently undefined.

ECO's loss is real. Ending the scheme removes £1.7 billion per year from home insulation for fuel-poor households. The replacement funding is around £500 million - less than a third. The UK's primary energy efficiency programme for low-income homes has effectively been scaled back significantly to fund a headline bill reduction.

Businesses are excluded. These levy changes applied only to domestic bills. Small businesses - which have no price cap protection and have faced some of the sharpest cost increases - receive none of the Q2 benefit.

What Should You Do?

Fixed deals have been trading at or below the cap for several months. With the Q2 cap now confirmed at £1,641, it's worth checking whether a fixed tariff could lock in a similar or lower rate through the winter - when the seasonal gas burden returns and the Q2 electricity saving won't be enough to offset it.