UK Household Energy Bills Set for Largest Increase in Four Years
Millions of households are bracing for a significant rise in energy costs as forecasts predict the biggest jump in typical annual bills in four years, potentially exacerbating the cost of living crisis.
Household energy bills in the UK are projected to increase by the largest amount in four years starting in January, with a typical annual bill forecasted to rise by £276, representing a 16% jump. This anticipated surge, revealed by figures shared with the BBC, is expected to affect millions of households during the coldest months.
The forecast from consultancy Cornwall Insight comes just before a 4% increase in prices on Thursday, under the current energy price cap set by regulator Ofgem. This upcoming increase will add approximately £60 annually to the average household bill, bringing it to £1,723.
However, projections for January indicate a much sharper rise. Cornwall Insight's latest forecast suggests the typical annual bill could climb to £1,999. This prediction highlights the ongoing volatility in the energy market, influenced by factors such as disruptions to gas supplies and low gas storage levels in Europe amid geopolitical conflicts.
Simone Rossi, chief executive of supplier EDF Energy, warned that the UK is "walking into a second energy crisis." He called for an extension of the VAT cut on electricity, which is set to expire in April, and urged the government to approve new domestic gas and oil field developments.
Analysts note that the price-setting period for the January cap is already underway, making a significant increase for those not on fixed tariffs highly probable. Craig Lowrey, principal consultant at Cornwall Insight, stated that a rise in January is "all but certain." He added that these price increases will hit households hard, particularly as January is typically a difficult month financially due to cold weather and post-Christmas expenses.
The energy price cap, which limits the price per unit of gas and electricity, currently affects about 20 million households across England, Scotland, and Wales. While the government's VAT cut is providing some relief, the projected January increase is substantial.
The sustained period of high domestic energy bills has contributed to a significant accumulation of unpaid bills, with customers collectively owing over £5 billion to suppliers, according to Ofgem data. Fuel poverty charity National Energy Action is calling for targeted government support for vulnerable households this winter, alongside measures to address energy debt and improve home energy efficiency.
Consumers are already feeling the pinch from rising costs across various essentials. Reports indicate that the cumulative debt of unpaid energy bills is unsustainable for both households and the energy market. The government has stated it is considering measures to support billpayers struggling with the cost of living.
Ofgem is expected to announce the official January price cap figure in late November. Despite the uncertainty, current market conditions suggest a significant increase is likely for variable tariff customers.