October has brought further uncertainty to UK energy markets, with prices climbing as the country heads into the winter months. We take a closer look at the key developments shaping the market throughout October and what they could mean for energy costs in the months ahead.

October in review

UK wholesale gas and electricity prices continued to rise in October, largely driven by geopolitical uncertainty, disruptions to Norwegian gas supplies, and concerns about gas availability as winter draws nearer.

The ongoing conflict in the Middle East continues to put pressure on energy markets. Uncertainty over energy shipments through the Strait of Hormuz has kept wholesale prices elevated, with traders closely watching developments that could affect global gas and liquefied natural gas (LNG) supplies. Meanwhile, unexpected outages in Norwegian gas production have tightened supplies to north-west Europe, adding to the rise in UK gas prices.

Gas prices rose significantly during the second half of October, with UK winter gas contracts reaching their highest levels of the month on 23 October. Forward electricity prices also increased, and despite occasional dips in trading, neither market showed a sustained downward trend.

Electricity prices continue to follow gas market trends, reflecting how heavily the UK grid relies on gas-fired power. Stronger wind generation has helped lower prices for electricity delivered the following day. However, this relief has not carried over into future contracts. The cost of securing power for the coming winter remains high, largely driven by gas prices, generator availability, and wider supply risks.

October also brought several announcements that will shape future UK energy costs. On 14 October, the National Energy System Operator (NESO) published its 5-year forecast for Transmission Network Use of System (TNUoS) tariffs. It projects that it will need to raise £9.47bn in 2027/28, around £356m above its initial forecast.

Higher network investment, inflation and the recovery of previously under-collected costs are driving the increase, adding pressure to business electricity bills. Draft tariffs for 2027/28 are expected in November.

Meanwhile, the Government’s Budget, published on 28 October, scrapped a planned levy on gas bills to fund hydrogen projects. From April 2028, the main Climate Change Levy (CCL) rates for electricity and liquefied petroleum gas (LPG) will remain frozen at 2027/28 levels, while gas and solid fuel rates will rise with inflation.

Eligible businesses will also receive support through the British Industrial Competitiveness Scheme from April 2027. While these measures offer some relief on energy costs, businesses remain exposed to rising network costs and ongoing wholesale market volatility.

Looking ahead

As we move into winter, the outlook for the UK energy market remains uncertain. Wholesale prices are likely to remain volatile, particularly if further supply disruptions coincide with colder weather and increased demand.

Globally, developments in the Middle East will remain a key influence. Further disruption to shipping through the Strait of Hormuz could limit LNG supplies and increase competition between Europe and Asia. Conversely, diplomatic progress, improved Norwegian gas supplies and increased LNG deliveries could help ease wholesale prices.

Domestically, weather conditions and wind generation will continue to influence short-term electricity prices. Colder, calmer periods could increase reliance on gas-fired generation, pushing prices higher, while stronger renewable output may offer some relief.

Looking further ahead, changes to government policy and electricity network charges will also play an important role in shaping business energy costs. While measures announced in the Autumn Budget may offer some relief, rising TNUoS charges are expected to place further pressure on electricity bills. NESO's draft tariffs, due in November, will provide a clearer indication of the costs businesses could face from April 2027.

For businesses, this reinforces the importance of looking beyond wholesale prices when reviewing energy expenditure. Understanding how network charges, government policy and market movements affect overall costs will be increasingly important when planning budgets and future energy contracts.