What the October 2026 price cap changes about what you run
Electricity loses its VAT and gas rises 8% from 1 October. The verified rates, and the point where a heat pump becomes cheaper than a gas boiler.
By David White
Something quietly significant happens to British energy prices on 1 October 2026, and it is not the headline.
The headline is that the cap rises 4%, from £1,663 to £1,723 a year for a typical household. That is true and it is the least interesting part. What actually changed is the relationship between the two fuels: VAT came off domestic electricity, gas bills rose 8%, and the gap between the price of a unit of electricity and a unit of gas narrowed to its smallest in years.
For anyone deciding what to run this winter, that gap is the number that matters.
The verified rates
Ofgem’s published cap rates for a typical direct debit customer, averaged across regions.
| July to September 2026 | October to December 2026 | Change | |
|---|---|---|---|
| Electricity unit rate | 26.11p per kWh | 26.32p per kWh | up 0.21p |
| Electricity standing charge | 57.19p per day | 54.83p per day | down 2.36p |
| Gas unit rate | 7.33p per kWh | 7.97p per kWh | up 0.64p |
| Gas standing charge | 29.04p per day | 29.68p per day | up 0.64p |
Electricity figures from 1 October carry no VAT. Gas figures include VAT at 5%.
The cap is arithmetic, not a limit
It is worth showing what the £1,723 actually is, because a great many people believe it is a maximum bill.
Take the capped rates and the consumption Ofgem uses for a typical household, 2,500 kWh of electricity and 9,500 kWh of gas a year:
- Electricity: 2,500 x 26.32p = £658.00, plus 365 days at 54.83p = £200.13
- Gas: 9,500 x 7.97p = £757.15, plus 365 days at 29.68p = £108.33
Total: £1,723.61. That is where the number comes from. It is a calculation about a hypothetical household, not a promise about yours.
The part of it worth staring at is £308.46. That is the combined standing charge for a year, payable before a single unit of anything is used. It is 18% of the typical bill and it is the same whether the house is occupied or empty.
The gap between the fuels has closed
Here is the change that matters.
In the summer cap, electricity cost 3.56 times as much per kWh as gas. From 1 October it costs 3.30 times as much. That ratio is the single number that decides whether electric heat is cheaper than gas heat, because a gas boiler turns roughly 85 to 90% of a unit of gas into heat, while a heat pump turns one unit of electricity into two and a half to four units of heat.
Cost per kilowatt hour of delivered heat, at October rates:
| Appliance | Efficiency | Cost per kWh of heat |
|---|---|---|
| Gas boiler | 85% | 9.38p |
| Gas boiler | 90% | 8.86p |
| Heat pump | SCOP 2.5 | 10.53p |
| Heat pump | SCOP 3.0 | 8.77p |
| Heat pump | SCOP 3.5 | 7.52p |
| Heat pump | SCOP 4.0 | 6.58p |
A heat pump running at a seasonal coefficient of performance of 3.0 now delivers heat at 8.77p per kWh. A well maintained condensing boiler running at 90% delivers it at 8.86p.
Under the summer cap, the same comparison went the other way: 8.70p for the heat pump against 8.14p for the boiler. The crossover happened on 1 October, and it happened because of a tax change rather than anything to do with the machines.
Two honest caveats. SCOP 3.0 is achievable but it is not automatic; a badly commissioned system in an under-insulated house will not reach it. And the boiler figure assumes 90%, which is the number on the label rather than the number most systems achieve in a real house with high flow temperatures.
What this means for cooling
Less than the heating story, but not nothing.
The electricity unit rate went up by 0.21p per kWh. A portable unit drawing 1 kW for six hours costs about 1.3p more per session than it did in September. That is not a decision changer.
The standing charge cut is worth more. £8.61 a year off the electricity standing charge is roughly the cost of running a 1 kW unit for 32 hours at the new rate, which for most households is more than they will save or lose on the unit rate over a whole year.
If you want the figure for your own machine and your own tariff rather than the average, the running cost calculator takes the rated power and your rate in pence per kilowatt hour and gives you the number. It has no default rate, deliberately: yours is on your bill, and a plausible looking default is worse than an empty box.
Our guide to what a portable air conditioner actually costs to run covers the arithmetic behind that in more detail.
What to actually do about it
Four things, in order of how much they are worth.
If you are on a fixed tariff, check what you are paying against 26.32p and 7.97p. A fix taken during the summer cap may now be above or below the capped rate on one fuel and not the other. The comparison has to be done per fuel, because they moved in opposite directions once VAT is counted.
If you have been weighing a heat pump, the sums changed this quarter. The comparison against gas is now close to level at a realistic SCOP, where it was not in the summer. That is one input among several, and the capital cost and the grant position still dominate the decision, but the running cost argument is no longer the objection it was.
Do not assume electricity is the expensive fuel any more. That heuristic was correct for most of the last decade and it is now roughly three and a quarter times, not four or five. Anything you decided on the old ratio is worth rechecking.
Ignore the £1,723. It describes a household that may look nothing like yours. The rates are the useful numbers; the annual figure is a headline.
The next cap
Ofgem sets the cap every three months. The rates above run to 31 December 2026, and the January to March level is normally announced in late November.
Whether the electricity to gas ratio holds is the thing to watch. The VAT removal is a one-off step change: it will not repeat, so from January onward the two fuels move on wholesale and network costs alone again. The announcement itself is the place to check rather than the coverage of it.
Questions
- Does the price cap cap my bill?
- No. It caps the unit rate and the standing charge, not the total. The widely reported figure of £1,723 is what a household using 2,500 kWh of electricity and 9,500 kWh of gas a year would pay at the capped rates. Use more and you pay more; there is no ceiling on the bill itself.
- Why did electricity barely move when gas went up 8%?
- Because VAT came off domestic electricity from 1 October 2026. The underlying wholesale and network costs rose, and the VAT removal offset almost all of that, leaving the electricity unit rate up by 0.21 pence per kWh while gas rose by 0.64. Gas still carries 5% VAT.
- Is my electricity standing charge really going down?
- Yes, from 57.19 pence a day to 54.83 for a typical direct debit customer, which is about £8.61 less over a year. The gas standing charge went the other way, up by roughly £2.34 a year. Both are averages, and standing charges vary by region.
- Does this make air conditioning cheaper to run?
- Marginally. The electricity unit rate rose by 0.21 pence per kWh, so a machine drawing 1 kW for six hours costs about a tenth of a penny more per hour than it did in September. The standing charge cut is worth more to most households than the unit rate rise costs them.
- Where do these numbers come from?
- Ofgem's published price cap rates for 1 October to 31 December 2026, direct debit, averaged across regions. Everything derived from them on this page is arithmetic on those figures, shown so you can check it.