Household energy bills are set to soar in January, with a typical annual bill forecast to jump by £276, figures shared with the BBC reveal. The 16% predicted increase would mark the biggest rise in bills for four years, hitting millions of households at the coldest time of year.
Cornwall Insight, a consultancy that advises the energy sector, has produced the forecast, which precedes Ofgem’s October price cap taking effect on Thursday. The cap puts a ceiling on how much each unit of gas and electricity can cost, and it covers roughly 20 million homes in England, Scotland and Wales that sit on variable tariffs.
The October Cap and What It Brings
On Thursday, those homes will see a 4% increase in prices. That works out to about £60 per year, or £5 per month, taking a typical annual bill to £1,723 for a household using both electricity and gas and paying by direct debit.
Without the government’s VAT reduction, the increase would have been larger. The cut trims around £45 from a typical bill annually by lowering the VAT rate on electricity to 5%, with the change taking effect on Thursday.
The October cap marks the beginning, not the end, of rising costs. Cornwall Insight now projects that the standard yearly bill will reach £1,999 by January. That represents a 16% increase.
Craig Lowrey, a principal consultant at Cornwall Insight, called the timing brutal. “These prices are going to hit households hard. January is already a difficult month for many, with cold weather and bank balances still recovering from Christmas,” he said.
Why Prices Are Rising
The projected increase stems from a breakdown in gas supplies caused by the Middle Eastern conflict. The result is a decline in Europe’s gas reserves, and restoring those supplies may push bills up “well beyond the winter”, according to Cornwall Insight.
A January rise was “all but certain”, according to Lowrey. He also noted that even though a calming of tensions might ease the strain on those paying bills, the window for setting the January cap has already passed its midpoint.
“With little sign of a truce or lower international energy costs, a big increase in prices for those not on a fixed tariff looks highly likely,” he said.
The People Paying the Price
A driver from Maidenhead has seen the cost rise in his own life. Aaron Richards runs a diesel car, and he now faces record-high prices for getting to and from work, along with climbing energy bills.
“I try to eat less takeaways, work more overtime, and try to budget a bit better, but at the same time, we shouldn’t have to,” he said.
“I just feel like everything’s going up. How far is it going to go? Someone’s got to step in,” he added.
“I know people who can’t afford to heat their house and they’re struggling at the moment. Housing and eating are two of life’s essentials that everyone should have. It shouldn’t be a challenge to have any of those things.”
The Scale of Unpaid Bills
Years of relatively high domestic energy bills have left some people facing large unpaid debts. Recent data from Ofgem showed that customers collectively owe more than £5bn in unpaid bills and charges to suppliers.
A proposed scheme for easing debt is sitting on the regulator’s table, and campaigners are urging them to move forward with it while calling on the government to fund its rollout. Adam Scorer, chief executive of fuel poverty charity National Energy Action, said the current state of affairs cannot continue.
“This is unsustainable, not just for households but also for the market as a whole,” Scorer said.
“The Budget must deliver additional targeted support for households most at risk this winter, alongside action to tackle energy debt and improve the least energy-efficient homes,” he added.
Pressure on Government
More strain is expected on the government to assist people who will find it hard to pay. Oliver Smith and Paul Seddon contributed further reporting, with graphics provided by Miguel Roca-Terry.
Simone Rossi, chief executive of supplier EDF Energy, has warned the UK is “walking into a second energy crisis” and called for an extension to the VAT cut on electricity, which kicks in on Thursday.
Speaking exclusively to the BBC’s Big Boss Interview podcast, Rossi said: “We are actually walking into a second significant energy crisis after the one we experienced just four years ago.”
He asked ministers to approve the Jackdaw gas field, located off the coast of Aberdeen, along with the Rosebank oil field off Shetland.
What Happens Next
The administration has repeatedly stated its intention to examine means of providing respite to those paying bills amid the cost-of-living crisis. Yet the projection remains merely an estimate, and Ofgem will not reveal the real January price adjustment until late November.
| Event | Date | Summary |
|---|---|---|
| Ofgem October cap rises | Thursday | 4% increase |
| VAT cut on electricity kicks in | Thursday | VAT reduced to 5% |
| Cornwall Insight forecast | Now | 16% rise, £276 per year |
| January cap confirmed | Late November | Actual price announced |
On Thursday, the October cap rises and the VAT reduction kicks in at the same time. The January forecast comes next, serving as a cautionary marker placed between those two events. After that, the government waits for Ofgem to confirm the January figures in late November.
The timing of the January increase could not be worse. Bank accounts are still rebounding from the holiday spending, and temperatures are dropping. Lowrey’s warning about it deserves to be repeated.
The war in the region plays a central role in shaping the forecast, and because European storage tanks sit so low, electricity costs may stay elevated long after the cold season ends. Since the pricing window is now half done, there is not much chance for anything to shift the result.
Breathing room has been promised by the government. Exactly what form it takes remains uncertain:
- More targeted assistance
- An extended reduction in VAT
- A wider response to the £5bn in outstanding invoices
What is certain is that families will soon confront the highest energy costs in four years during the coldest season of the year.
That is the situation, and it is not a comfortable one.
Source material: “Household energy bills forecast to see biggest rise in four years,” the BBC.
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