Energy bills to fall 7% with Ofgem's February 2026 price cap set at £1,641

Ofgem, the energy regulator, has announced this morning that the energy price cap that runs from 1 April to 30 June 2026 will be set at £1,641.

This is a 7% drop from its current level of £1,758. It was widely expected that the cap would come down as energy suppliers factor in the government’s pledge to take £150 off the average customer’s bill from 1 April. Wholesale prices have also dropped by about 6% over the past three months, which has further enabled the drop.

How is the energy bill reduction going to work?

Suppliers are removing an average of £150 from customers’ bills through the removal of the Energy Company Obligation and 75% of the Renewables Obligation (for three years only), which are green levies paid for by customers. 

These payments are baked into unit rates for gas and electricity. Removing them means that those unit rates will come down, but does mean that customers with higher levels of energy usage will save more money than those who use less.

The £150 is an average figure in the same way that the price cap figure reported in the media represents the annual cap level for an average use medium-sized household paying by Direct Debit.

What should you do about the price cap?

It depends on your current situation.

If you’re on a standard variable tariff (as 33 million UK households are), you should switch. Don’t be lulled into a false sense of security because the price cap’s coming down, because there are even cheaper fixed deals on the market that will enable you to save now rather than waiting until April.

If you’re on a fixed deal, it depends on how long you have left on your contract.

• If you have more than 49 days left, you can switch but you might have to pay exit fees to do so, which could eat into the amount you’d save. You can switch but be aware of the cost of doing so.
• If you have less than 49 days left, you can switch without paying exit fees, and you should make sure you do so. If you don’t switch, you’ll be rolled onto your supplier’s standard variable tariff which will mean your bills rise. 

Richard Neudegg, director of regulation at Uswitch, said: “This 7% drop in April’s energy price cap is a meaningful cut for household bills, taking default tariffs to their lowest level in almost two years. While energy won’t feel ‘cheap’ for consumers, this is a welcome move in the right direction. 

“The main driver of this price drop is the Budget decision to remove some levies from consumer bills. 

“Critically, this Government-led reduction means every household in Britain will see their rates reduced from April, not just those on the typically more expensive price cap default tariff. 

“The levy changes are mostly in the electricity unit rates, so the exact reduction in bills will vary per household, based on energy usage. This is not going to be a uniform £150 cut to bills - higher-usage homes will see the biggest savings, while those using less energy may see a more modest change.

“Within the price cap, there will also be changes in standing charges - those households with gas supply will see a decrease. Standing charges overall remain a frustration point for many consumers, making up around 19% of the average household’s bill.

“Despite this change, households stuck on the price cap should not rest on their laurels. Customers switching to a cheap fixed tariff could see their bills up to 19% cheaper than today’s standard rates once the reduction kicks in, compared with the 7% reduction from simply sticking with the price cap.

“There are currently 30 fixed energy deals on the market that undercut the current price cap. With savings of up to £260 for the average household, taking action is a must - and their rates will get even cheaper from April.”