Energy price warning
From the Money Show
The key points from the show
Martin Lewis opened his energy bills special with the warning nobody wanted to hear:
New predictions suggested the energy price cap would rise by over 20% in January 2027, on top of the 3.6% already confirmed for October.
The figure from two suppliers, EDF and E.ON, was 24%. As Martin put it, for every £1,000 you pay today, you would be paying £1,240 in the new year.
The Energy Secretary, pressed later in the same programme, put the likely rise at 18%. But Martin was pretty blunt: the cap is definitely going to rise in January, and probably substantially.
1 October price cap
Gas up nearly 9%. Electricity up less than 1%.
But we’ve got energy price rises to deal with already next month.
On 1 October the cap rises 3.6%, but the cap isn't a limit on your total bill. It's a limit on unit rates and standing charges. If you use more, you pay more.
If you look at the two fuels separately, they tell very different stories:
At a glance
Same cap. Different story.
The headline rise is 3.6%, but the change looks very different when gas and electricity are separated.
- Gas: unit rate up nearly 9%, standing charge up 2.2%.
- Electricity: unit rate up less than 1%, standing charge down.
One reason electricity looks relatively tame is the temporary VAT cut.
From 1 October, domestic electricity in Great Britain is charged at 0% VAT instead of 5% – a temporary cut HMRC has confirmed runs to 31 March 2027, worth roughly £45 a year to a typical household.
Practical effect
The practical effect for a household: heat with gas and you'll see more than a 3.6% rise. Be a low-usage, electricity-only home and you'll be less impacted.
How the market works
Why electricity is priced the way it is
Martin’s point was simple: gas is relatively cheap, while electricity is expensive.
And that price gap affects the running-cost comparison between gas boilers and electric heat pumps.
Why the electricity price stays high
More power now comes from cheaper renewables, but the wholesale price can still be set by gas-fired generation.
The price gap
Heat pump economics
Reducing the gap would improve the economics of heat pumps further and strengthen the case for moving homes away from fossil-fuel heating.
The market
Gas can set the price
Part of the problem is how the electricity market works. Gas-fired power stations often set the wholesale electricity price, even though more of our power now comes from cheaper renewables.
The network
Managing the grid
There are also costs associated with managing the grid. When electricity cannot be moved efficiently from where it is generated to where it is needed, the system operator may have to pay some generators to switch off and others to switch on.
When the grid is constrained
The system has to rebalance.
What you can control
You cannot change the energy market from your home. What you can change is how much energy you buy from it.
Your energy bill
The part of the bill a home can actually control
Some costs are fixed by the market. Others give your home room to act.
| What's on your bill | Who sets it | What a South-West home can do |
|---|---|---|
| Variable Unit rates | Ofgem's cap, then your supplier | Generate your own electricity with solar panels, store it in a battery, buy the rest in an off-peak window. Solar panels Battery storage |
| Fixed daily cost Standing charges | Ofgem's cap and network costs | You can’t reduce a standing charge by using less energy – it’s charged daily regardless of consumption. Fixed |
| Home system Heating | Gas, oil or electricity | A well-designed air source heat pump can typically deliver around three to four units of heat for each unit of electricity it uses. Air source heat pumps |
| Income Export income via the Smart Export Guarantee (SEG) | Your supplier's export tariff | Shop around for the best deal. The SEG actually creates an energy income for you, rather than a cost. Energy out → income in |
Another audience member
Another called them a moral hazard.
Standing charges
The cost you can't shift.
Standing charges got a segment of their own on Martin’s show, and it’s not surprising why.
Martin has campaigned on them for three years and expects the picture to look different within a year. Until then, they are the one part of the bill that no amount of solar can shift.
For solar owners
Martin's 10% rule for solar owners, explained
If you already have solar panels, Martin’s advice comes down to one simple comparison: how much electricity you buy from the grid and how much you export.
Which price matters most?
Check which side of 10% you're on.
Compare the whole year
Don't judge a tariff on one rate.
The 10% figure is only a guide. To compare deals properly, estimate what you would pay for electricity over a year, subtract your expected export payments, and choose the deal with the lowest overall cost.
Whole-home energy
Heat pumps work best with solar and battery storage
Instead of burning fuel like gas or oil, an air source heat pump moves heat from outside your property to inside, and typically produces around three to four units of heat for each unit of electricity used.
How it works
1 unit in. 3–4 units of heat out.
That efficiency is why the running-cost comparison between fossil fuel and electricity can be much closer than the raw electricity prices alone might suggest.
How you power it matters
Move energy to cheaper hours.
How the system is powered can make a significant difference to running costs. A smart heat-pump tariff can run the heat pump and heat the hot-water cylinder during cheaper off-peak hours. The cylinder stores that heat for later, reducing the amount of full-price electricity needed during the day.
One connected system
Heat pump + solar + battery
Put together, the heat pump, solar panels and battery act as one system: the heat pump uses electricity efficiently, the panels generate part of that electricity, and the battery shifts cheaper energy to the times it is needed.
Result
Less reliance on peak-rate electricity.
This can reduce reliance on peak-rate electricity and make household energy costs more predictable.
Design matters
The system has to fit the home.
Good design is essential. The heat pump must be correctly sized, with suitable radiators, hot-water storage and tariff.
Boiler Upgrade Scheme
Upfront support.
The Boiler Upgrade Scheme reduces the upfront cost significantly: most eligible homes can receive £7,500 towards an air-to-water or ground source heat pump, rising to £9,000 until 31 March 2027 for eligible off-gas-grid homes replacing oil or LPG heating.
- Until 31 Mar 2027
One date · three changes
Three deadlines land on 31 March 2027
Three energy changes arrive on the same date. But only two are decisions a homeowner can act on before the deadline.
The shared deadline
31.03.27
VAT support and the enhanced off-gas heat pump grant all meet at the end of March.
- Not in your control
Electricity bills
Electricity VAT cut
The electricity VAT cut runs out on that date.
- Homeowner can act
Solar · battery · heat pumps
0% installation VAT ends
So does the 0% VAT rate on installing solar panels, battery storage and heat pumps, which reverts to 5% on 1 April 2027.
- Homeowner can act
Eligible off-gas-grid homes
£9,000 grant window closes
And the £9,000 off-gas heat pump grant window closes the same day, back to the standard £7,500.
- Installation VAT
- Heat pump grant
The important distinction
Three dates coincide. Only two are in your control.
We've written about the VAT change and what it covers in more detail. All three dates coincide, but only the last two are within a homeowner’s control.
Your action plan
What to do this week
Four practical checks you can make now — from your current export rate and tariff to the numbers for your whole home.
If you already have solar
Check your SEG export rate.
If you own solar panels, find out what you're being paid and when your rate last changed.
- What are you being paid?
- When did your rate last change?
- Ask about
- Heating oil support
- When?
- Before winter demand hits.
If your home uses oil
Ring your council.
If you heat with oil, ring your council about any heating oil support that might be available before the winter demand hits.
Before you fix
Don't fix your tariff blind.
Martin's advice on fixes was that the cheapest on the market sit slightly above today's cap but below October's, and that fixing is the risk-averse move if you want certainty. Compare across the whole market, not just your own supplier, and use the "show all tariffs" toggle.
The bigger picture
Get the numbers for your own home.
If you’re weighing up a heat pump, solar or a battery, consider having them priced together as a whole-home system. That lets you see how solar generation, battery storage, heating demand and electricity tariffs could work together.
Instead of pricing:
Price the system.
Whole-home energy flow
One system
The takeaway
The bottom line.
The difference
That's the difference between watching the price cap and energy rises with a feeling of helplessness, and taking control of your energy destiny.
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