UK Energy Market Report -01 July 2026

01 July 2026 | Mid-Market Business Customers 

Executive Summary 

The UK wholesale energy market remains highly volatile, driven by Middle East geopolitical risks, extensive domestic nuclear outages, and rising non-commodity network charges. For mid-market businesses, navigating this landscape requires a structured contracting strategy. 

Wholesale forward curves remain in backwardation, offering a commercial opportunity to capture lower outer-year rates via multi-year fixed contracts or forward contracting. This report delivers transparent pricing and clear fixed-contract recommendations to assist Smarter Business clients in securing price certainty and robust budget protection.  

UK Energy Market Price Snapshot — Electricity 

Supply tightness and low wind output have forced the grid to rely heavily on gas-for-power generation, tying power prices directly to gas curve movements. This thermal reliance is exacerbated by widespread outages across the UK’s 5.9 GWe nuclear fleet. Sizewell B’s B-1 and B-2 reactors are undergoing planned outages of 55 and 60 days, while Heysham 1-1 (610 MW) and Heysham 1-2 (585 MW) face statutory and unplanned repair outages.  

Furthermore, Hartlepool-1 (620 MW) is offline following a steam leak, and Heysham 2-7 is in a planned 33-day outage. These outages remove over 3,000 MW of nuclear capacity, leaving the grid highly sensitive to gas price shocks and increasing short-term system price sensitivity. 

Contract £/MWh	1 July 2026	16 June 2026	Change D-1 vs D-14	% change	Direction
DA	103.78	106	-2.22	-2.09%	Down
Aug-26	95.13	93	2.13	2.29%	Up
Sep-26	96.5	90.5	6	6.63%	Up
Oct-27	97.68	96.13	1.55	1.61%	Up
Q4-26	99.72	92.25	7.47	8.10%	Up
Q1-27	97.46	97.5	-0.04	-0.04%	Down
Win 26	98.6	96.71	1.89	1.95%	Up
Sum 27	76.13	76.5	-0.37	-0.48%	Down
Win 27	77.14	79.5	-2.36	-2.97%	Down
Sum 28	60.56	61.5	-0.94	-1.53%	Down
Win 28	69.81	70	-0.19	-0.27%	Down

UK Energy Market Price Snapshot — Gas 

Wholesale natural gas prices have firmed due to Norwegian pipeline restrictions, including an unplanned Asgard outage (6 mcm/day), and the ongoing Strait of Hormuz shipping crisis. Despite the Islamabad MoU signed on June 17, 2026, disputes over transit routes—a US southern lane near Oman versus Tehran’s northern route—have triggered military strikes and a missile attack on “The Ever Lovely”. 

A temporary breakdown in Qatar-mediated talks spiked NBP gas to two-week highs, showing extreme sensitivity to Middle East maritime transit risks. 

Contract p/therm	1 July 2026	16 June 2026	Change D-1 vs D-14	% change	Direction
DA	105.8	101.37	4.43	4.37%	Up
Aug-26	104.45	98.72	5.73	5.80%	Up
Sep-26	105.78	99.28	6.5	6.55%	Up
Oct-27	106.76	101.02	5.74	5.68%	Up
Q4-26	109.58	99.79	9.79	9.81%	Up
Q1-27	108.12	105.49	2.63	2.49%	Up
Win 26	108.86	105.14	3.72	3.54%	Up
Sum 27	80.12	80.48	-0.36	-0.45%	Down
Win 27	81.62	82.5	-0.88	-1.07%	Down
Sum 28	63.01	63.25	-0.24	-0.38%	Down
Win 28	71.11	72	-0.89	-1.24%	Down

 Forward Curve Insight 

Where approved forward prices are available, a comparison between seasonal contracts reveals a winter premium alongside structural backwardation across the curve. Baseload electricity decreases from 98.6 £/MWh for Winter-26 to 77.14 £/MWh for Winter-27, and down to 69.81 £/MWh for Winter-28. Gas contracts similarly drop from 108.86 p/therm in Winter-26 to 81.62 p/therm in Winter-27, and to 71.11 p/therm in Winter-28. 

This backwardation structure indicates that delaying fixed contract decisions introduces  contracting risk. Conversely, executing longer-term fixed contracts that blend these discounted outer years is the optimal contracting strategy to lower overall average unit rates and achieve price certainty. 

 Non-Commodity Cost Update 

Non-commodity costs constitute 60% to 65% of commercial electricity bills. Under Ofgem’s RIIO-ET3 price control, an average 64% volume-weighted increase in Transmission Network Use of System residual charges has roughly doubled daily standing charges for many mid-sized high-voltage connections. 

Furthermore, Distribution Use of System rates are projected for steep rises in April 2027, with standing charges expected to increase by 65% to 77%. Balancing Services Use of System (BSUoS) charges remain fluctuating, though the October 2026–March 2027 block is confirmed at a higher rate. 

Conversely, the transition of the Renewable Obligation and Feed-in Tariff schemes from RPI to CPI from April 2026 will slow inflation-linked levy growth. However, the EII Support Levy rose by 50% in April 2026, adding further cost pressure. 

Regulatory & Industry Developments 

Under the RIIO-3 price control framework, Ofgem has increased network costs to fund grid upgrades, while raising the domestic price cap by 13% for July to September 2026. Macroeconomic factors add complexity; in June 2026, the Bank of England held interest rates at 3.75% for the fourth consecutive month. 

This restrictive stance reflects sticky CPI inflation, which stood at 2.8% in May 2026, and persistent energy market uncertainty, indicating that high utility overheads remain a major risk for business consumers. 

 Procurement Strategy & Recommendations 

October 2026 Contract Starts 

For contracts commencing in October 2026, the recommended strategy is a 24-month or 36-month fixed contract with a buy now policy. This is commercially justified by the high risk premium embedded in the Winter-26 contract, with electricity at 98.6 £/MWh and gas at 108.86 p/therm. Locking in a longer-term fixed contract captures backwardation by blending lower forward rates from Summer-27 and Winter-27, diluting near-term costs and providing budget protection. 

April 2027 Contract Starts 

For contracts starting in April 2027, the recommended approach is a 24-month fixed contract with a buy now policy. Direct comparison with an October 2026 start reveals a clear structural advantage: the April 2027 contract completely bypasses the expensive Winter-26 risk premium, opening directly into Summer-27 where electricity is priced at 76.13 £/MWh and gas sits at 80.12 p/therm. However, because the forward market is highly sensitive to geopolitical shocks, delaying execution carries substantial risk. Securing a fixed contract now locks in this lower seasonal baseline before potential spot market escalations erode available value. 

 Risk & Opportunity Snapshot 

Category	Factor	Operational Impact	Strategic Mitigant
Risk	Strait of Hormuz shipping disruptions	Sudden upward spikes in wholesale gas and power rates	Secure multi-year fixed contracts to lock in current forward curves
Risk	UK nuclear fleet outages	Elevated short-term power prices and imbalance fees	Finalise fixed contracts to insulate budgets from spot volatility
Risk	Rising DUoS and TNUoS charges	Higher non-negotiable standing charges on utility bills	Utilise Dataview to audit and optimise agreed supply capacity bands
Opportunity	Backwardated forward curve	Cheaper outer-year seasonal rates (2027/2028)	Enter longer-term fixed contracts to blend down average unit rates
Opportunity	CPI re-indexation of green levies	Slower annual inflation escalation of RO and FiT	Work with Smarter Business to ensure accurate tariff billing

  Knowledge Section 

Mid-market business consumers can manage rising non-commodity charges through proactive demand-side efficiency measures. Shifting high-consumption operational processes outside of peak periods reduces exposure to expensive DUoS peak red band rates. Furthermore, reducing peak usage and improving consumption visibility allow energy managers to avoid unnecessary peak demand charges. 

Smarter Business recommends using its energy analytics platform, Dataview, to manage these overheads. Dataview enables businesses to optimise capacity by analysing consumption profiles and identifying peak demand periods. This supports a precise review of Maximum Import Capacity (MIC) to ensure agreed kVA limits match actual operational needs, directly avoiding excessive DUoS banding charges. Ultimately, Dataview supports cost reduction decisions and improves the quality of future procurement decisions, transforming consumption visibility into direct budget protection. 

If you would like to understand how these market movements impact your business, your Smarter Business account manager is on hand to guide you through your options.