Ofgem confirms 4% October cap rise as fixed rates pull £100 clear

Ofgem has confirmed that fixed tariffs are running at least £100 below the October price cap, a gap that translates into savings of up to £173 a year for households that move off the default cap rate. The guidance lands alongside confirmation that the price cap itself will rise by 4% from October 2026, adding to household costs just as the fixed-deal discount widens. The Guardian reported that Ofgem is now actively pointing consumers towards the fixed market rather than leaving them on capped variable rates.

The mechanism is straightforward: suppliers are pricing new fixed deals below the forward cap level because wholesale costs embedded in fixed offers currently sit lower than the assumptions baked into the October cap. Ofgem's press release confirms the 4% cap increase was driven by higher wholesale costs feeding through the standard calculation, but that suppliers competing for fixed-term customers have not passed the full increase through to term contracts. That pricing gap is what has driven this year's record switching activity, with 362,000 supplier changes recorded in July alone, according to The Guardian.

What this means for commercial energy buyers

The household story matters to commercial buyers because it signals the same dynamic playing out across small business and micro-business tariffs: fixed-term pricing is currently detached from, and cheaper than, the capped or default reference rate. For finance directors and office managers renewing contracts this autumn, the message is the same as Ofgem's to households: a fixed deal secured now may lock in a rate below where the reference point is heading. Businesses on out-of-contract or deemed rates, which typically track cap-style movements, are the most exposed to the October increase and stand to gain the most from moving early.

• Around 11 million homes (35% of the market) are already fixed and unaffected by the October rise
• Fixed tariffs are priced £100 or more below the October cap level
• 362,000 household switches were recorded in July, the highest monthly total this year
• A further price cap rise is anticipated for January, according to Ofgem's outlook
• Businesses on deemed or out-of-contract rates carry the most direct exposure to cap-linked increases

The January risk is the detail buyers should not skip past. If Ofgem's cap trajectory continues upward into the new year, as the regulator's own commentary suggests is likely, the discount currently available on fixed deals could narrow or reverse if wholesale markets tighten. That makes early autumn a more favourable window to fix than waiting to see how the winter cap review lands.

What to watch next: Ofgem's confirmation of the January price cap review, due in the coming months, will determine whether the current fixed-versus-cap gap widens further or starts to close, and that outcome should shape the timing of any renewal decision still open on your calendar.