Household energy bills could rise sharply again in January as wholesale gas prices remain under pressure, with a typical dual-fuel bill forecast to reach almost £2,000 a year.
January Could Bring The Biggest Rise In Four Years
Cornwall Insight expects the average bill to rise by 16% to £1,999 from January 1, which would represent an increase of £276 compared with the October price cap. Cornwall Insight said the predicted increase would be the largest rise in the energy price cap since January 2023.
The forecast comes as energy markets continue to react to disruption linked to the conflict involving Iran and the effect on supplies through the Strait of Hormuz, a major route for global energy shipments.
Cornwall Insight also said European gas storage levels were at their lowest September level for 15 years, adding to uncertainty around prices during the colder months. Dr Craig Lowrey, principal consultant at Cornwall Insight, warned to The Sun that households could face further pressure during a period when heating demand is typically higher.
October Bills Are Already Rising
The January forecast comes as a new Ofgem energy price cap takes effect on October. The cap will rise by 4%, bringing the annual figure for a typical household in England, Scotland and Wales paying by direct debit to £1,723.
That represents an increase of around £60 a year, or £5 a month, compared with the previous level. More than four million households on standard energy tariffs are affected by the latest change.
At the same time, cooler temperatures are expected to increase energy consumption as households begin using central heating more frequently.
Electricity VAT Cut Provides Some Relief
Households will also benefit from the removal of 5% VAT on domestic electricity bills from October 1 until March 31 next year. Government estimates suggest the change will save an average bill payer around £45 a year.
VAT on domestic gas remains at 5%. The effect of the electricity VAT change could be partly offset by higher wholesale energy costs if January prices rise as forecast.
Households Can Check Their Energy Tariff
Consumer comparison service Uswitch has advised households to review their energy arrangements as prices change. Customers without smart meters have also been urged to submit an up-to-date meter reading to their supplier around the change in price cap. This can help suppliers distinguish energy used before and after October 1.
Uswitch said some fixed tariffs are currently priced below the January forecast, giving households another option to consider. Richard Neudegg, director of regulation at Uswitch, said moving away from a standard variable tariff could reduce exposure to future price increases, although households should also consider the terms and length of any fixed deal.
Energy Use Could Push October Spending Higher
The change in weather is also expected to affect household spending. Uswitch estimates that a typical household on a standard tariff could spend around £145 on energy in October, compared with approximately £109 in September.
The difference reflects both higher unit prices and greater energy use as temperatures fall. For households facing tighter budgets, monitoring consumption and reviewing available tariffs could help limit the rise in spending.
Next Price Cap Will Be Announced In November
Ofgem is due to announce the next price cap in November, covering the period from January to March 2027. Until then, the £1,999 figure remains a forecast from Cornwall Insight, rather than a confirmed price cap.
Wholesale energy prices can change before the next cap is set, meaning the final January figure could differ from the current prediction.
