The July 2026 Energy Price Cap – What Changed

From 1 July 2026, Ofgem raised the domestic energy price cap by 13% – the largest quarterly increase since 2022. Here is what moved and by how much:

Source: Ofgem. Figures for a typical domestic household paying by direct debit including 5% VAT. Business energy rates are negotiated separately and will differ.

The critical number for businesses is the gas unit rate rise of 27.7% in a single quarter. Gas prices rose sharply from the previous period, driven primarily by continued supply uncertainty linked to the conflict in Iran and its impact on international energy shipping routes, including the Strait of Hormuz, a passage that handles approximately 20% of global oil and LNG shipments.

Electricity increased by a more modest 5.8%, reflecting the grid’s growing proportion of renewable generation, which provides some buffer against gas market volatility. Standing charges on both fuels remained essentially flat.

The next cap review covering October to December 2026 will be announced by Ofgem on or before 26 August 2026.

Does the Energy Price Cap Apply to Businesses?

No, and the distinction matters more than most business owners realise.

The Energy Bill Relief Scheme, which provided some protection for business energy costs during the 2022-23 crisis, ended in March 2023. The Business Energy Support Scheme that followed ended in April 2023. Since then, businesses have had no regulatory backstop on energy pricing.

This makes the wholesale market movements behind the domestic cap directly relevant to your costs. When the cap rises because wholesale gas prices have increased, your business renewal quotes will reflect the same underlying market conditions.

What Drives the Energy Price Cap and Your Business Costs

Ofgem’s cap is calculated from several cost components. Understanding them helps explain why the cap moves and why business prices follow the same trajectory.

The top two components, wholesale costs (42.8%) and network charges (21.9%), apply equally to business energy. This is why a 13% domestic cap rise does not produce an identical 13% rise in business prices, but it does create upward pressure in the same direction.

Network charges are worth particular attention in 2026. TNUoS charges, which fund the national transmission grid, rose by approximately 60% from April 2026 as the cost of grid upgrades for renewable energy connections is passed to all electricity consumers. This affected both domestic and business customers simultaneously, though the domestic impact was partially absorbed within the cap calculation.

How the July 2026 Cap Rise Affects Your Business Energy Costs

The cap does not set your business rate directly. But here is how the market movements behind it flow through to your bills depending on your situation:

The businesses most exposed to the July 2026 market movement are those on out-of-contract or deemed rates, and according to Ofgem’s Non-Domestic Consumer Research from March 2025, only 34% of small businesses switched supplier in 2024. The majority have not actively reviewed their tariff in the last 12 months.

Why Businesses Are More Exposed Than Domestic Customers

This is the fundamental inequality in the UK energy market that most business owners are not aware of.

The most significant gap is the deemed rate ceiling. A domestic household that lets its contract expire is still protected by the price cap; the supplier cannot charge above the capped unit rate even on a default tariff. A business that lets its contract expire has no such protection. The supplier can, and typically does, apply a rate 40-60% above the best available fixed price in the market.

This is why contract management matters so much for businesses. The domestic customer who ignores their energy deal is inconvenienced. The business that ignores its energy deal pays significantly more with no regulatory protection.

Quarter by Quarter – Energy Price Cap History 2024-2026

Understanding the trajectory of the cap helps you see where the market has been and anticipate where business prices are heading.

The trajectory matters for business planning. The Q3 2026 rise — driven by geopolitical supply disruption rather than structural demand change — creates uncertainty about Q4. If the Iran situation stabilises, wholesale gas prices may ease before October. If disruption continues or escalates, the October cap could rise further. Businesses with contracts expiring in Q4 2026 face a genuinely uncertain renewal environment.

What This Means for Business Gas Costs Specifically

Gas deserves particular attention given the 27.7% quarterly increase in the domestic cap rate. The same wholesale market conditions are reflected in business gas pricing.

Illustrative figures based on competitive fixed contract rates. Actual costs depend on contract terms, location and consumption profile.

For businesses with high gas consumption, particularly hospitality, care homes and manufacturing, a 1p increase in the gas unit rate adds hundreds of pounds per year to operating costs. For businesses on out-of-contract rates, the gap between their current rate and the best available fixed rate can be several pence per unit, costing thousands of pounds annually.

How to Protect Your Business From Rising Energy Costs

Rising wholesale markets make proactive contract management more important, not less. Here is what to do depending on where you are in your contract cycle.

The one action that applies to every business regardless of situation: know your contract end date. If you do not know it, call your supplier today and ask. The consequences of not knowing, and rolling onto an out-of-contract rate, are significant in any market. In a rising market, they are more expensive still.

Read our detailed guide to out-of-contract business energy rates if your contract has already expired. For businesses approaching renewal, our commercial energy comparison service accesses live rates from 30+ suppliers simultaneously at no cost.

Three Things to Do Right Now

1. Check whether your contract is active
Call your supplier and ask: is my energy contract currently on a fixed term, and if so, when does it end? If the answer is that you are on a variable or out-of-contract rate, you need to move immediately.

2. Get a market comparison
Contact Kilowatt Energy for a free comparison across 30+ suppliers. In a rising market, locking in a competitive fixed rate now is almost always better than waiting. The comparison takes one phone call, and we handle the switch end to end at no cost to your business.

3. Check your VAT rate
With bills rising, this is not the time to overpay on VAT. Charities, care homes and businesses below Ofgem’s micro-business thresholds (under 100,000 kWh electricity or 293,000 kWh gas per year) may qualify for 5% VAT instead of 20%. If you have been paying 20% incorrectly, you can reclaim up to 4 years of overpaid VAT from your supplier.

FAQ: Business Energy Price Cap UK

Q: Does the energy price cap apply to business energy?
No. The Ofgem price cap applies exclusively to domestic customers on standard variable or default tariffs. Business energy contracts are negotiated directly with suppliers and are not covered by any equivalent cap. Since the Business Energy Relief Scheme ended in March 2023, there has been no government price protection for commercial energy customers.

Q: What is the current energy price cap for July 2026?
From 1 July 2026, Ofgem set the domestic price cap at £1,862 per year for a typical household, a 13% increase from £1,641 in Q2 2026. Under Ofgem’s updated Typical Domestic Consumption Values, the equivalent figure is £1,663. The cap is reviewed every three months. The next review covering October to December 2026 will be announced by 26 August 2026.

Q: Why did the energy price cap rise so sharply in July 2026?
The primary driver was a 27.7% increase in the wholesale gas unit rate, from 5.74p to 7.33p per kWh. This reflected supply uncertainty linked to the ongoing conflict in Iran and its impact on international energy shipping routes, including the Strait of Hormuz, which handles approximately 20% of global oil and LNG shipments. The electricity unit rate rose by a more modest 5.8%.

Q: How does the price cap affect business energy prices if it does not apply to businesses?
The cap does not set business prices directly. However, the wholesale energy market movements that drive the cap higher, particularly gas prices, are the same forces that affect what businesses are quoted at contract renewal. A 27.7% quarterly rise in the wholesale gas rate creates upward pressure on business gas renewal quotes regardless of whether the cap applies.

Q: What happens to my business energy if I do not renew my contract?
If your contract expires without a new one in place, your supplier moves you onto an out-of-contract or deemed rate. Unlike domestic customers, who are still protected by the price cap on default tariffs, businesses have no regulatory ceiling on deemed rates. These rates are set entirely by the supplier and are typically 40-60% above the best available fixed rates in the market. Read our guide to out-of-contract business energy.

Q: Should I lock in a fixed business energy rate now given the July 2026 market movement?
For most SMEs, fixing a competitive rate in a rising market is the right approach; it provides budget certainty and protects against further rises. The trade-off is that if wholesale prices fall before your contract ends, you will pay above the new market rate for the remainder of your term. For businesses where energy is a high cost and budget certainty matters, locking in now is generally the more prudent choice. Read our wholesale vs fixed business energy prices guide for a full comparison of the two approaches.

Q: How can Kilowatt Energy help with the current market conditions?
We compare live rates from 30+ UK energy suppliers simultaneously and manage the switch from start to finish at no cost to your business. We also conduct forensic bill audits to identify overcharges, check VAT eligibility, and manage all future renewals proactively, contacting you 90 days before each contract end date to ensure you never roll onto an out-of-contract rate.