Business Energy Market Update: January 2026

At the start of December prices were still on a downward trajectory as seasonal temperature predictions continued to be above normal. By the end of the month, day-ahead power had continued its bearish momentum, finishing on £45MW/h down from £76MWh, as strong wind output and lower demand added pressure. December’s end also brought colder weather however, and along with news that the start of 2026 would be a cold one, all forward contracts for delivery from January increased accordingly, with gains of 2% across the board.

Gas prices reacted more quickly to the cold weather during the month and by the end of the year, day-ahead had increased by 4p/therm to 76p/therm. Forward contracts for gas into the new year saw marginal rises for deliveries up to Autumn 2026 where the market becomes bearish due to predicted increases in LNG export capacity and weaker underlying demand from Asian markets.

December was a quiet month for energy news with the exception of the finalisation of Ofgem’s RIIO ED3 methodology consultation, the mechanism by which budgets for distribution and transmission are decided. From 2028, the energy networks will receive a whopping £28 billion upgrade package to continue the process of readying our energy infrastructure for the transition to renewable sources of electricity and away from natural gas. £17.8 billion will go towards making our gas network safer, more resilient and ready for the move away from fossil fuels with the rest being spent on upgrading electricity transmission. It is hoped that the upgrade will go a long way to reducing costs the network incurs when renewable generators are paid to turn off in cases where their power cannot be transported to the end user and it is hoped this will offset some of the costs with far less than the headline £28 billion being passed to consumers.

Ofgem are also confident they have achieved value for money for energy customers and claim £4.5 billion was shaved off the costs under their 'challenge process' where Ofgem has pushed back against what it sees to be excessive costing for some of the projects covered by RIIO ED3.

Coming so quickly on the heels of the recent increase in TNUoS cost and the RAB charge to fund our next large scale nuclear reactor, this news will surely be met with trepidation by most.

It's price cap review time again for domestic customers and in January, we will see an increase of 0.2% on the previous quarter. This will mean a typical bill will rise marginally to £1758 a year, although it’s likely energy prices will fall slightly for the first quarter of this year and therefore, we expect the price cap to drop by around 5% for the April update. Of course, nothing is certain in the current climate, so time will tell!

If you have any energy or utility related questions or your fixed deals are ending soon, please get in touch with the team at Clear Utility.