Domestic energy bills

How high are UK domestic energy bills? 

The Ofgem energy price cap is set at £1,755 (for an annual bill) for a typical household using electricity and gas until the end of March. The price cap will fall to £1,641 from 1 April 2026 until 30 June 2026. ²⁹ Ofgem, Energy price cap explained, 2026, www.ofgem.gov.uk/information-consumers/energy-advice-households/energy-price-cap-explained  This will protect households from short term changes in the global price of gas resulting from conflict in the Middle East. If global prices remain elevated and volatile then this would be reflected in a higher price cap from July onwards. Early estimates suggest that this could lead to a price cap of around £1,800 (a 10% increase) but this is very uncertain. ³⁰ Cornwall Insight, July Price Cap Forecast Rises to £1,800 as Conflict in the Middle East Drives up Gas Prices, 2026, https://cornwall-insight.com/press-and-media/press-release/july-price-cap-forecast-rises-to-1800-as-conflict-in-the-middle-east-drives-up-gas-prices/

Some households in the UK are not covered by the price cap; this includes those who heat their homes with oil. These households are much more vulnerable to short-term changes in global energy prices. On 16 March, the government announced over £50 million of support targeting low-income families who heat their homes with oil. This will be allocated based on census data about how households heat their homes and will be distributed by devolved governments and through the Crisis and Resilience Fund in England. ³¹ HM Treasury and Northern Ireland Office, Over £50 million to help families struggling with soaring heating oil costs, 2026, www.gov.uk/government/news/over-50-million-to-help-families-struggling-with-soaring-heating-oil-costs

Household energy bills are lower than their peak in 2022/23, but they remain higher than historical averages. Since the Russian invasion of Ukraine, higher bills in the UK have largely been driven by increases in the price of gas. ³² Nesta, Is gas still the reason energy bills are so high?, 2025, www.nesta.org.uk/blog/is-gas-still-the-reason-energy-bills-are-so-high/  But the government has also funded a range of policies through energy bills, such as expansion of renewables and energy efficiency schemes and measures to support poorer households – so called “policy costs”.

High bills have the biggest impact on lower-income households since price rises eat up a greater share of their disposable income or they may not have enough income to cover the increased cost and have no choice other than to cut back on energy use or build up debt and arrears. Domestic energy costs form 6% of total household expenditure on average, but 10% of expenditure for the lowest income decile. ³⁴ Office for National Statistics, Family Spending in the UK: April 2023 to March 2024, 2025, www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/bulletins/familyspendingintheuk/april2023tomarch2024  Energy costs also result in higher prices for other goods and services as businesses pass on their own higher energy costs to households.

What could be the impact of the ongoing conflict in the Middle East on domestic energy bills?

The UK depends on international supplies of oil and gas to meet domestic demand, but the conflict in the Middle East – with Iran halting oil and gas shipments through the Strait of Hormuz – is causing major disruption and uncertainty in international energy markets. 

International gas prices have the biggest impact on domestic bills both for heating and for electricity (because of the use of gas to generate electricity). The oil price largely affects households through the cost of petrol and higher costs for businesses which will feed through into higher prices.

In the short term, higher oil prices will lead to inflation, but the energy price cap will shield most households from the impact of higher gas prices until the end of June. The key question will be the length and severity of disruption. Even if the current conflict is short-lived, there may be long run effects if higher levels of risk lead to higher costs for those who produce or transport energy.

What could the government do if energy prices stay high?

If energy prices continue to increase or remain high the government may wish to take further action to support households and businesses. The options available to the government will depend on who it plans to support, and how long it expects to provide support. 

When gas prices were sent rocketing by the Russian invasion of Ukraine, the government introduced an Energy Price Guarantee, which capped typical households bills at £2,500 from October 2022 to March 2024. This effectively held household bills down, but this policy was both broad (it applied to all households) and expensive (it moved some costs from households to the government but did not incentivise households to use less energy). A future support programme could be cheaper if it was targeted at households in greatest need and encourage households to use less energy. ⁴² IFS, The welfare effects of price shocks and household relief packages: evidence from an energy crisis, 2025, https://ifs.org.uk/publications/welfare-effects-price-shocks-and-household-relief-packages-evidence-energy-crisis

Policy proposals:

• Implementing a social tariff targeted at those with low incomes and high energy needs. ⁴³ Resolution Foundation, Power struggle, 2026, www.resolutionfoundation.org/publications/power-struggle/
• Capping prices for all households, but paying for it through a temporary increase in income tax that would see those on higher incomes paying more of the costs. ⁴⁴ Labour Together, Cap energy prices, raise taxes, 2026, www.labourtogether.uk/blog/cap-energy-prices-raise-taxes
• Creating a ceiling and a floor for gas bills so that the government supports bills when prices are high, but taxes them when they are low. ⁴⁵ Nesta, The energy edit (second edition), 2026, www.nesta.org.uk/blog/the-energy-edit-2/

The government could also look to accelerate some of its current policies to increase renewable generation, support electrification, encourage households to switch to heat pumps and improve energy efficiency. The benefits of doing so are higher when the cost of the alternative (continuing to depend on gas) is so high.

What was the government doing to lower energy bills?

Before the current conflict in the Middle East, the government was taking action to lower energy bills. At the autumn 2025 budget, the chancellor announced measures to reduce domestic energy bills from April 2026. ⁴⁶ Department for Energy Security and Net Zero, What does the Autumn Budget mean for your energy bills?, 2025, www.gov.uk/government/news/what-does-the-autumn-budget-mean-for-your-energy-bills  This included removing some policy costs from bills and funding some of those policies from general taxation rather than bills.

This is in addition to existing energy bill discounts:

• warm home discount: £150 off energy bills for low-income households
• cold weather payments (in England, Wales or Northern Ireland) or winter heating payments (in Scotland): additional bill reductions for eligible households
• winter fuel payment: payment for people receiving the state pension (though those paying higher rate tax will have to pay it back with their tax bill).

The government has also published a Warm Homes Plan ⁴⁷ Department for Energy Security and Net Zero, Warm Homes Plan, 2026, www.gov.uk/government/publications/warm-homes-plan  to support households to reduce bills and switch to greener energy sources through a mix of grants and loans for upgrades such as heat pumps, batteries and insulation.

What energy bill approach best with the government’s commitment to decarbonise the energy system by 2030 and achieve net zero by 2050?

The Labour manifesto committed to saving households “hundreds of pounds on their bills”, ⁴⁸ Labour, Make Britain a clean energy superpower, 2024, https://labour.org.uk/change/make-britain-a-clean-energy-superpower/  through delivering its clear power plan. This envisaged bills falling through a combination of:

• reduced dependence on volatile international gas prices through generating more renewable energy
• more energy efficient homes and businesses
• more flexibility in the energy system so power is used when it is cheapest

However, while the government’s long term strategy will eventually build energy security through increasing renewables generation and integration with neighbouring countries, domestic bills are still heavily exposed to international events. This means that short term intervention may still be needed.