Energy price cap forecast to jump 16% in January — the steepest rise since 2022

Household energy bills are expected to rise sharply in January, with the typical annual bill forecast to increase by £276 as the January price cap is revealed. According to figures shared with the BBC by energy consultancy Cornwall Insight, the 16% jump would take a typical dual-fuel direct debit bill to £1,999 — the largest single increase in four years.

The forecast lands at the most expensive point of the year for consumers, arriving in the depths of winter when heating demand is at its peak and many households are still recovering financially from the cost of Christmas. It also comes at a politically sensitive moment, piling pressure on the government to support families who will struggle to pay.

Cornwall Insight has built a strong reputation for its price forecasting, and is widely respected across the energy industry and in Westminster. Major suppliers have made similar projections in recent weeks, lending weight to the numbers.

The mechanics of the cap explain why so many people are exposed. Around 20 million households across England, Scotland and Wales are on variable tariffs covered by the regulator's price cap, which limits the maximum price chargeable for each unit of gas and electricity rather than the total bill.

For those households, prices are due to rise by 4% on Thursday, adding roughly £60 a year — about £5 a month — and lifting the typical annual bill to £1,723 for a household using both fuels and paying by direct debit, assuming that level of usage were sustained over a full year.

That increase would have been steeper without the government's cut to VAT on energy, which is currently worth the equivalent of around £45 a year on a typical bill. The relief is due to end on Thursday, and its expiry has prompted fresh calls from the industry for it to be extended.

Simone Rossi, chief executive of supplier EDF, warned that the UK is "walking into a second energy crisis". He has asked the government to prolong the VAT reduction on electricity as it expires, arguing that removing support at the point when prices are climbing again would worsen the squeeze on consumers already in hardship.

The January forecast is far more significant than Thursday's adjustment. Craig Lowrey, principal consultant at Cornwall Insight, said the projected rise would land at the worst possible time of year. January is already difficult for many households, he noted, combining cold weather with bank balances still strained by festive spending.

The underlying driver is disruption to gas supplies linked to the conflict in the Middle East, which has left storage levels across Europe unusually low heading into winter. Lowrey warned that rebuilding those stocks to normal levels could keep prices elevated "well beyond the winter", meaning the January increase may not mark the peak.

The trajectory of the cap over recent years illustrates how sharply household costs have moved. The typical bill stood at £1,673 in spring 2022 before surging to a high of £3,582 in the July to September 2023 period, then falling back to a low of £1,414 in the same quarter of 2024. Since then it has fluctuated in a narrower band, ranging roughly between £1,543 and £1,655, before edging upwards again in the forecast period.

Crucially, none of this is confirmed. Ofgem will not publish the official January cap until late November, and the window in which the price is calculated is already half complete. Any easing of Middle East tensions, or a fall in international energy prices, would feed into that calculation and could soften the increase.

Even so, Lowrey believes a rise in January is effectively unavoidable. With no clear signs of a lasting truce and no meaningful drop in wholesale costs, he described a January increase as "all but certain" for households on variable deals, though the final figure remains subject to change.

For consumers, the prospect is grim. Aaron Richards, from Maidenhead, said he is already managing tightly — cutting back on takeaways, working additional overtime and trying to budget more carefully. He also drives a diesel car and is paying record high prices at the pumps to get to and from work.

"I just feel like everything's going up," Richards said. "How far is it going to go? Someone's got to step in." He added that he knows people who cannot afford to heat their homes, pointing out that housing and food are essentials that should not be a struggle for anyone.

The squeeze is compounded by a mounting arrears problem. Recent Ofgem data shows customers collectively owe more than £5bn in unpaid bills and charges to suppliers, a legacy of several years in which domestic energy costs have remained high.

Ofgem has a proposed debt relief scheme on the table, but campaigners are pressing the regulator to move ahead with it and the government to provide the funding needed to make it work. Without intervention, they warn, the debt will keep growing and eventually threaten the wider market as well as individual households.

Adam Scorer, chief executive of fuel poverty charity National Energy Action, said the situation is "unsustainable, not just for households but also for the market as a whole". He said the Budget must deliver additional targeted support for the households most at risk this winter, alongside action to clear energy debt and improve the least energy-efficient housing.

Attention now turns to the confirmation of the October cap on Thursday and, more significantly, to the November decision. With gas storage still depressed, the January figure likely to be the first to reflect the full impact of the current disruption, and the political debate over support for bills is certain to intensify.