Energy bills set to rise from 2026 to fund network improvements, Ofgem says
Energy bills are set to increase by £24 a year from 2026 to help fund improvements on gas networks and electricity grids as it transitions to green power.
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Customers would pay an additional £104 by 2031, comprising of £30 for gas networks and £74 on electricity, under the provisional new Ofgem measures.
It comes as 21 million households in the UK today saw their gas and electricity bills drop by £11 a month under the regulator's latest price cap.
Speaking about the proposed future rise, Jonathan Brearley, Ofgem CEO, insisted that "doing nothing is not an option and will cost customers more" as plans for a £24billion investment programme were unveiled.
The additional funds will enhance energy security while enabling the transmission of more clean energy from renewable sources.
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Mr Brearley said: “Britain’s reliance on imported gas has left us at the mercy of volatile international gas prices which during the energy crisis would have caused bills to rise as high as £4000 for an average household without government support.
"Even today the price cap can move up or down by hundreds of pounds with little we can do about it.
“This record investment will deliver a homegrown energy system that is better for Britain and better for customers. It will ensure the system has greater resilience against shocks from volatile gas prices we don’t control."
He added: “Doing nothing is not an option and will cost consumers more – this is critical national infrastructure. The sooner we build the network we need, and invest to strengthen our resilience, the lower the cost for bill payers will be in the future.
“However, this can’t be done at any price, which is why we have built in cost controls and negotiated a fair deal for both investors and consumers. And we won’t hesitate to intervene if network companies don’t deliver on time and on budget.”
Of the additional £104 cost by 2031 for customers, around half is needed for the gas and electricity grids to maintain "safety, resilience, and reliability", according to Ofgem.
The remainder, around £52, will be used to expand the capacity of the electricity grid to deal with the rising demands of a more electrified energy system, as we move away from gas.
The £52 cost is expected to lead to around £80 of savings for customers compared to not upgrading and expanding the electricity and gas networks.
These costs should also reduce even further as the benefits from the investment fully materialise through the 2030s.
The draft determinations are now published for consultation with final decisions made by the end of 2025.