The good news is that energy prices in the wholesale market have been dropping. That means your energy company has buying gas and electricity for less. Good news - your energy bills will keep falling, right?

Possibly, but not as much as you might expect. We'll explain why.

Why Falling Energy Prices Won't Help You (right away)

There are a few reasons why households haven't seen as much relief in their energy bills as they might hope, despite falling wholesale prices:

• Timing of energy purchases: Energy suppliers typically buy their energy ahead of time so energy bought today at lower prices won't reach the market for use until late in 2026. Energy consumed by households today was purchased back in 2025.

• Wholesale costs are just part of your bill: Right now, wholesale costs account for around 39% of a typical domestic dual fuel bill. Many of the other costs are somewhat fixed from year to year. So your bill will not drop as quickly as wholesale costs.

• Energy Price Cap: Historically, the Energy Price Guarantee (EPG), which took precedence over the Energy Price Cap (EPC) in 2022/2023, meant consumers paid less than they should have, with the government essentially subsidising the difference. As energy got cheaper, it was first be the government who paid less in subsidies then, when prices dropped enough, consumers saw cheaper bills.

According to market rates in early 2026, it's clear that prices have fallen since peaks in 2022/2023, but households will notice that prices have come down slowly relative to drops in wholesale prices. We'll try to explain why these factors will minimise or delay the impact of falling wholesale prices on your household energy bill.

Market & Market Timing of Natural Gas Prices

Wholesale prices take time to filter through to the retail marketplace. Energy companies buy energy months and months in advance. As a result, there is always a delay between market moves and the prices that consumers pay (or changes in the Energy Price Cap).

If we assume it takes 6-9 months for wholesale prices to work their way through the system and reach household bills, then a drop in wholesale prices could take nearly a year to benefit consumers.

This market feature holds true in both rising and falling markets. For example, in 2022, the energy price cap rose in a delayed manner, that is, well after the wholesale prices increased. So prices didn't go up for consumers as quickly as the wholesale market rose. By the same token, there is a delay in when consumers feel energy bill relief as prices fall.

As of January 2026, natural gas futures have stabilized significantly after the volatility of recent years, with prices appearing to settle near levels seen in the 2010s. While colder winter weather in mid-January 2026 briefly pushed gas prices back above the 80p-per-therm mark, they remain steady rather than dropping drastically further as spring approaches. Forward contracts for summer 2026 and beyond suggest a seasonal discount, with spring gas available from approximately 78.98p.

The chart below shows futures prices as of January 2026 in dark blue, and what the futures prices were back at a few points in 2022 and 2023. We've also included the historical close prices in gold (these are essentially the actual, historical wholesale costs at a given time).

The futures prices indicate expectations for natural gas prices. As you can see (and will remember!) energy prices increased dramatically in August 2022 (light green line on the chart), but have been steadily dropping since. As of January 2026, natural gas futures are the lowest they've been in years.

In early 2026, wholesale gas prices are near levels seen at various points in the 2010s. And it appears that the market expects energy prices to remain somewhat steady over the next few years.

Components of Energy Bills

Historically, wholesale costs accounted for around 35% of a typical domestic dual fuel bill.

During the energy crisis, this rose to 74% (a higher percentage when wholesale prices were so high). But in Q1 2026, they are projected to account for around 39% of a typical bill, closer to historical averages.

Here are the latest stats in February 2026 for energy bill cost components:

Since wholesale costs only account for a portion of the household energy bill, not the entire bill, and the other costs are somewhat fixed, household bills rise and fall less that wholesale prices. That is, if wholesale prices fall x%, household energy bills would fall y%, where y is less than x.

This is another reason that you won't feel the full effect of changing wholesale natural gas costs.

While it's certainly better that wholesale prices are coming down, the government subsidies are still needed to help protect household finances, and may be for some time according to market predictions.

Effect of the EPG

Due to the government’s Energy Price Guarantee (EPG) in 2022 and 2023, UK households were paying less than they should have been for energy at the time. For example, the price cap was technically £3,280 until 30 June 2023, but households were protected under the EPG, which limited the charges for a typical household to £2,500 - a savings of around £780 per year.

While the EPG was in effect, it was the government, and by extension taxpayers, who first felt the benefit as rates fell, since they were essentially subsidising household energy bills. Once rates fell below EPG levels (in July 2023), cheaper wholesale rates were then felt by consumers - but not before. So, once rates fell below EPG levels (in July 2023), cheaper wholesale rates were felt by consumers.

For your information, here is the history of the Energy Price Cap for the past few years: