Key facts
- UK household energy bills are forecast to rise by 16% in January.
- The predicted increase would mark the biggest jump in bills for four years.
- A typical annual bill is forecast to rise to £1,999.
- Ofgem's price cap will increase by 4% on Thursday, adding about £60 to typical annual bills.
- The government's VAT cut on electricity will reduce typical bills by about £45 annually.
- Disruption to gas supplies and low European gas storage levels are contributing factors.
Household energy bills in the UK are forecast to experience their largest increase in four years in January, with a typical annual bill projected to jump by £276, or 16%. This forecast from consultancy Cornwall Insight comes ahead of a 4% price cap increase on Thursday and heightens concerns about a potential second energy crisis.
About 20 million households on variable tariffs will see their bills rise by approximately £60 annually from Thursday, bringing the typical bill to £1,723. This increase would have been higher without a government VAT cut on electricity, which saves households around £45 per year. However, Cornwall Insight's latest prediction suggests the typical annual bill could reach £1,999 in January.
Cornwall Insight attributes the forecast rise to disruptions in gas supplies stemming from the conflict in the Middle East and consequently low gas storage levels in Europe. The consultancy warned that rebuilding these stocks could lead to high bills extending beyond the winter.
While the forecast is subject to change and Ofgem will announce the official January price cap in late November, a significant increase appears likely given current market conditions. Craig Lowrey, a principal consultant at Cornwall Insight, stated that a January rise is "all but certain."
Consumers like Aaron Richards from Maidenhead are already struggling with rising costs, noting increases in fuel and general living expenses. He expressed concern that essential costs like heating and food are becoming challenging to afford.
Recent data from Ofgem indicates that consumers collectively owe over £5 billion in unpaid energy bills. Campaigners are urging the government to fund a proposed debt relief scheme to address this growing issue. Adam Scorer, chief executive of National Energy Action, described the situation as unsustainable for both households and the market, calling for targeted government support and measures to improve home energy efficiency.
Simone Rossi, CEO of EDF Energy, echoed these concerns, warning of a "second significant energy crisis" and advocating for an extension of the VAT cut on electricity beyond its April expiry. He also suggested government approval for new gas and oil fields, such as Jackdaw and Rosebank.