Bank of England faces fresh headache as UK energy bills climb for the second straight quarter

British households just caught a break from inflation. Now that break is over. Ofgem, the UK’s energy regulator, announced a 4% increase to the domestic energy price cap effective October 1 through December 31, 2026. The move raises the typical annual bill for a dual-fuel household paying by direct debit to £1,723, a £60 bump from the current cap of £1,663. What’s driving the increase The culprit is familiar: wholesale gas prices. They’ve surged 61% over the past three months, driven largely by escalating tensions in the Middle East, particularly involving Iran. Gas unit rates are set to climb 8.7% to 7.97p per kilowatt-hour. Electricity, by contrast, is barely budging, with rates rising just 0.8% to 26.32p/kWh. That modest electricity number is partly thanks to the government’s temporary removal of VAT on electricity bills, a measure that saves households roughly £45 annually on the energy cap, independent of Ofgem’s quarterly adjustments. This latest hike lands on top of a 13% increase that took effect in July 2026. Back-to-back rises have pushed bills to their highest point in three years. Roughly 22 million households on standard variable tariffs will feel the impact. The appro...