Business Energy Market Update: October 2026

September finished with prices higher across the board, as stalled peace talks between the US and Iran - and lower than average European gas storage for the time of year - kept the market on edge.

Day-ahead electricity ended the month at £160MWh, up from £130MWh at the end of August, although much of that movement was due to a significant drop in wind output for the beginning of October. Gas on the other hand saw a much steadier increase of 7% finishing at 178p/therm, up from 167p/therm, although still far higher than at the start of the year. October gas and power told a similar story too, both rising around 7% on the previous month’s close.

Looking further out, the news worsened as forward contracts for gas and electricity saw steep rises for summer and winter next year. Gas rose 18% to 130p/therm for the summer with winter gas climbing 17% to 124.75p/therm. Power followed closely at £104.75MWh for summer 27 and 105.50 for winter.

Crucially these prices are double what they were at the beginning of the year and serve as a worrying indication the market is no longer treating the current pressure as a short term problem and is now pricing it well into 2027.

The news was just as bleak on the domestic front with the new price cap increase coming into force on 1 October. The 4% increase will see an average bill rise to £1,723 a year for a typical household, with gas price increases the main driver. Further bad news is on the horizon as sustained high wholesale prices are likely to see another increase of 15% in January. With the review period for this latest announcement running to mid November, there is scant hope of anything other than more punishment.

That being said, the government is stepping in with a VAT relief scheme for electricity scheduled to run up to March next year. Although with VAT on domestic bills rated at 5%, this won’t go far enough for some households and with most of the increases coming from gas prices, misses the mark somewhat.

Elsewhere, Andy Burnham used his conference speech to announce the Great British Grid. It’s not a fish and chip shop though, it’s a new body within Great British Energy and the first state-owned player in electricity networks since privatisation. It will co-invest in grid infrastructure alongside the existing network companies, focusing on transmission and areas where connection delays are holding back investment, with businesses will also gaining greater rights to build their own high-voltage connections. The prime minister’s ambition is to bring UK energy costs into line with Europe within ten years, which is welcome news for anyone stuck in a connection queue, but will do little for prices this winter.

I applaud any effort to get the connections backlog down and this is a positive indication that the government is thinking about business growth and getting things moving. I sincerely hope the focus on transmission will lead to the upgrades we need to reduce the egregious curtailment payments and wasted wind power, the cost of which has already passed £1bn so far this year!

As always, the team at Clear Utility Solutions are happy to talk through what this means for your own utilities, so please get in touch with the team on our usual channels.