Ofgem Announces 13% Price Cap Rise: What It Means for Your Business

28 May 2026

Energy regulator Ofgem has today confirmed a 13% increase to the domestic energy price cap, effective 1 July 2026. While the cap applies exclusively to household customers on standard variable tariffs, the forces driving this increase are the same ones reshaping the business energy market. That is something every commercial energy buyer should pay close attention to.

What Has Ofgem Actually Announced?

From 1 July, the price cap for a typical domestic household will rise to £1,663 per year (based on updated typical consumption figures), up from the current £1,641. The headline driver is a sharp rise in wholesale gas prices, which Ofgem attributes to continued volatility stemming from the ongoing conflict in the Middle East.

There is a notable split within the cap itself: electricity prices are rising by around 5%, while gas prices are surging by 24%. Ofgem points to the growth in UK renewable generation as the reason electricity is better insulated. The grid is simply less reliant on gas-fired power than it was a few years ago.

The Price Cap Does Not Cover You, But the Cause Does

Let us be clear: the Ofgem price cap does not apply to business energy contracts. Commercial energy is traded in a fully competitive wholesale market, where pricing is shaped by consumption volume, contract type, risk exposure, and supplier appetite, not a regulatory ceiling.

Both domestic and business tariffs draw from the same wholesale pool. When wholesale gas prices spike, as they have now, the pressure ripples across every type of energy contract. Suppliers do not absorb that cost; they pass it on. For domestic customers, Ofgem provides a regulated backstop. For businesses, there is no equivalent protection.

This means the same underlying market conditions that triggered today's announcement are almost certainly affecting the rates you will see when your next business contract comes up for renewal.

What This Tells Us About the Market Right Now

A few things stand out from today's announcement that are directly relevant to commercial buyers.

Wholesale gas remains volatile. The Middle East conflict shows no sign of near-term resolution, and European gas storage levels remain a concern heading into next winter. Expect continued price uncertainty through Q3 and into Q4 2026.

Electricity is more stable than gas. The divergence in today's cap (5% for electricity versus 24% for gas) reflects a structural shift in how the UK grid is powered. If your business is heavily gas-dependent, whether in manufacturing, food processing, or hospitality, your cost exposure is higher than businesses that rely primarily on electricity.

Consumption patterns are changing. Ofgem's update to its Typical Domestic Consumption Values shows households are using around 7% less electricity and 17% less gas than at the last review. Similar trends are playing out across commercial sectors. If your half-hourly data has not been reviewed recently, you may be paying for consumption that no longer reflects how your sites actually operate.

What Should You Do Now?

If your business energy contract is due for renewal in the next three to six months, now is a particularly important time to act rather than wait.

Review your contract end dates. Rolling onto a default out-of-contract rate in a rising wholesale market is one of the most expensive mistakes a business can make. Know when your contract expires.

Consider fixing before the market moves further. Fixed-price contracts offer certainty. Whether that certainty is worth the premium depends on your risk appetite and the length of term on offer, but in a market trending upward, fixing sooner rather than later is worth serious consideration.

Explore your contract structure. Not all business energy products are the same. Flexible purchasing, basket contracts, and pass-through tariffs all behave differently in volatile markets. There is rarely a one-size-fits-all answer, and the right structure for a multi-site retailer looks very different to what suits a single-site manufacturer.

Look at demand-side opportunities. The growth in renewable generation that is shielding domestic electricity bills is also creating opportunities for commercial buyers, particularly around time-of-use pricing, flexible demand, and on-site generation. These will not suit every business, but they are worth exploring as part of a broader energy strategy.

The Bigger Picture - Price Cap Rise

It is worth keeping perspective. As Ofgem's CEO noted today, prices remain well below the peak of the 2022 energy crisis, when the government stepped in to cap domestic bills at £2,500 and businesses faced eye-watering contract rates. Today's market is volatile, but it is not in crisis.

That said, complacency is expensive. Geopolitical instability, transitioning energy infrastructure, and evolving market products mean that businesses without a clear energy strategy are consistently paying more than they need to.

If you would like to understand how today's announcement affects your specific situation, or if you want a review of your current contract position, get in touch with our team. We are here to help make sure your business is in the best possible position, whatever the market does next.

The information in this article is based on Ofgem's price cap announcement of 27 May 2026. Business energy prices are not subject to the price cap; this article is for informational purposes only and does not constitute financial or contractual advice.