What Does the New Energy Price Cap Mean for Business Energy Prices?

What is the current energy price cap?

Right now (until 30 September 2026): the price cap is £1,663 a year for a typical household paying by direct debit.

From 1 October 2026: the cap rises to £1,723, confirmed by Ofgem on 26 August. That's up 4%, or £60 a year. Source: Ofgem.

Ofgem changed how it measures typical household energy use back in July. On the older basis, used for comparing against most of 2026, the October figure works out at £1,935 a year, up from £1,862.

The rise is almost entirely down to gas. Wholesale gas prices have moved higher, largely because of the conflict in Iran and the pressure it's put on international supply routes. The government's also removed VAT from domestic electricity bills between October 2026 and March 2027, which is keeping electricity costs broadly flat. As a result, gas bills are rising by around 8%, while households that don't use gas will see a rise of less than 1%.

Ofgem will confirm the next cap, covering January to March 2027, by 25 November 2026.

Source: Ofgem. Figures based on a typical household paying by direct debit. From 1 October 2026, VAT has been removed from domestic electricity bills until 31 March 2027, so the electricity unit rate isn't directly comparable to the VAT-inclusive July figure. Gas still carries 5% VAT.

Gas is where the pressure sits for October. The unit rate's up 8.7% quarter on quarter, from 7.33p to 7.97p per kWh, largely on the back of higher wholesale prices linked to the conflict in Iran. Electricity's a different story this time. The unit rate's barely moved once you account for the VAT removal, and the standing charge's actually fallen slightly.

These are domestic rates, so they won't be what you're paying directly. But they come from the same wholesale market your supplier buys from. When input costs move this sharply, business quotes at renewal tend to follow, particularly if you're in manufacturing, hospitality, or any sector that relies on commercial heating or kitchen equipment.

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What might happen to prices this winter?

The October rise isn't likely to be the last one this winter. Cornwall Insight, an independent forecaster whose predictions have tracked close to Ofgem's confirmed figures all year, expects the cap to rise by a further 9% when the January to March 2027 period is set. That would take the typical household bill to around £1,872 a year, roughly £149 higher than the October level. Source: Cornwall Insight.

Ofgem will confirm the actual figure by 25 November 2026. Until then, this is a forecast rather than a confirmed number, but it points in a clear direction: wholesale gas prices are still under pressure heading into peak winter demand.

For businesses, the same wholesale market applies. Supplier quotes move with these costs well before Ofgem's household figure is confirmed each quarter, and a business contract renewing in December or January won't wait for that announcement to reflect where the market's sitting. Keeping track of when your own contract's up with myHUB means you're not caught out by a renewal landing right in the middle of a price spike. If your renewal falls over the winter, comparing now gives you a clearer picture than waiting for the January cap to land.

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What is the energy price cap?

The energy price cap is set by Ofgem, the UK's energy regulator. It limits the maximum unit rates and standing charges that suppliers can apply to domestic customers on standard variable or default tariffs.

It was introduced in January 2019 to protect households from being overcharged when they're not on a fixed deal. The cap doesn't limit total bills. A household using more energy than the typical amount will still pay more than the capped figure.

Ofgem reviews the cap every three months, adjusting it to reflect changes in wholesale energy costs, network charges, operating costs, and government policy levies.

Does the energy price cap apply to businesses?

No. The energy price cap applies to domestic customers on default or standard variable tariffs. Business energy contracts aren't covered.

Most businesses agree fixed-term or bespoke contracts directly with suppliers. There's no equivalent Ofgem price cap for business energy, and there hasn't been since the government's Energy Bill Relief Scheme and Business Energy Support Scheme ended in March and April 2023, respectively.

That said, the cap isn't irrelevant to you. The wholesale market movements that drive cap changes are the same forces that influence what you're quoted when your contract comes up for renewal or you switch suppliers. So when the cap rises sharply, it's often a signal that business prices are under pressure too.

What drives changes to the energy price cap?

Wholesale gas prices rose sharply earlier this year, after the conflict in Iran created uncertainty around key international supply routes, including the Strait of Hormuz, which handles around 20% of global oil and LNG shipments. That's fed directly into the July cap. Network and policy costs tend to be more stable, though they can shift with infrastructure investment and government decisions.

Note: figures above are from Ofgem's July 2026 cap breakdown. We're checking with Ofgem's latest published data for an October equivalent, this table will be updated once confirmed.

When wholesale gas prices rise, as they have through mid-2026 due to global market conditions, this feeds through directly into a higher cap. Network and policy costs tend to be more stable, though they can shift with infrastructure spending and government decisions.

What does the price cap mean for business energy costs?

The cap doesn't set your prices directly. But the wholesale market behind it has moved significantly this quarter, and that tends to flow through into what you're quoted at renewal, particularly on gas. 

If your contract's ending in the next six months, it's worth comparing now rather than waiting. The quote available today may look quite different from the one available when your deal actually runs out.

Compare your business energy options across a panel of suppliers, or look specifically at business electricity and business gas separately.

How can businesses manage energy costs when prices are rising?

A few approaches are worth considering, and none of them requires specialist knowledge.

Compare at renewal and before it. Prices vary between suppliers even in a high-price market. Comparing across a panel of suppliers gives you a clearer picture of what's available, rather than just accepting whatever your current supplier offers.

Consider a fixed-rate contract. Locking in a rate when wholesale prices are stable can protect you from future rises. It also makes budgeting simpler. The trade-off is less flexibility if prices fall. Take a look at your business electricity options or business gas contracts to see what's on the market.

Review your usage. Reducing consumption is the one lever that works regardless of what the market does. Even modest efficiency improvements can offset higher unit rates.

There's no single right answer. The best approach depends on your usage, your appetite for price certainty, and when your current deal ends. What helps is having a clear picture of your options before you need to make a decision.

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