Household energy bills in Great Britain are forecast to increase sharply in January, with the typical dual-fuel bill expected to rise by £276 to £1,999 a year. The prediction from energy consultancy Cornwall Insight comes as gas prices increase and European storage levels remain low.
The forecast follows a 4% rise in the energy price cap from October, which will take the typical annual bill for households using both gas and electricity to £1,723 if maintained over a full year. The January increase would represent the largest quarterly rise since January 2023, according to Cornwall Insight.
Gas Market Disruption Drives Higher Energy Costs
The expected rise is linked to disruption in global energy markets following the conflict in the Middle East. According to Cornwall Insight, gas prices in Europe have doubled in recent months as countries prepare for colder weather with gas storage levels at their lowest September level for 15 years.
The consultancy said supplies had been affected by several factors, including reduced refilling of storage facilities after a cold end to the previous winter and increased demand for gas power generation during summer heatwaves. Disruptions affecting oil and gas exports from the Gulf have also contributed to higher market prices.
Craig Lowrey, principal consultant at Cornwall Insight, said households would face difficult conditions during January, a period when many people are already dealing with colder weather and higher spending after Christmas.
“These prices are going to hit households hard,” Lowrey said, according to Cornwall Insight. He added that the forecast represented the biggest price cap rise seen in four years.
The January figure remains a forecast rather than a confirmed price change. Ofgem, the energy regulator for Great Britain, will announce the official price cap covering January to March 2027 in November. The regulator calculates the cap using wholesale energy prices during a defined period, meaning the final level could change if market conditions shift.
Government Faces Pressure as Households Prepare for Higher Bills
The predicted increase has increased calls for further support for households facing higher energy costs. According to the Energy Fuel Poverty Coalition and National Energy Action, vulnerable and low-income households may face additional pressure during winter as bills rise.
National Energy Action chief executive Adam Scorer said the October price cap increase was already creating difficulties for households struggling with energy costs. He called for additional targeted support, action on energy debt and measures to improve the energy efficiency of homes.
The government has introduced a temporary removal of VAT from household electricity bills from October, a measure expected to save the average bill payer around £45 a year. Households will continue to pay VAT on gas, according to government estimates.
Prime Minister Andy Burnham said the government was considering possible measures to reduce pressure on households. Speaking to BBC Radio 4’s Today programme, he said the cost of home energy and fuel prices was “very difficult indeed”.
Energy supplier EDF has also called for further action. According to the BBC, EDF chief executive Simone Rossi said the UK was “walking into a second energy crisis” and urged the government to extend the reduction in VAT on electricity bills.
The rise in energy costs comes as households are already facing unpaid energy charges. Ofgem data cited by the BBC shows customers collectively owe more than £5bn in unpaid bills and charges to suppliers. The final January price cap will be confirmed by Ofgem later in the year, but current forecasts indicate that households on variable tariffs may face higher costs during the winter months.
