Cornwall Insight forecasts 16% energy price cap jump in January — the biggest rise in four years

Household energy bills are forecast to rise sharply in January, with the typical annual bill increasing by £276 as cold weather coincides with soaring prices, according to figures shared with the BBC by energy consultancy Cornwall Insight. If the prediction is accurate, roughly 20 million households on Ofgem's price cap will see their costs climb to about £1,999 a year — a 16% increase and the biggest single rise in the cap for four years.

The forecast lands at the most expensive point of the year, just weeks after the current cap is itself due to increase. It also intensifies pressure on the government to come up with additional support for struggling households, with ministers already under criticism for allowing a VAT relief on electricity to expire.

Prices for the millions of households in England, Scotland and Wales currently on variable tariffs will rise by 4% on Thursday, under the October price cap. That increase is worth around £60 a year, or roughly £5 a month, and takes the typical annual bill to £1,723 for a household using both gas and electricity and paying by direct debit, assuming that level of usage continued over a full year.

That rise would have been steeper had it not been for the government's VAT cut, which removes the equivalent of about £45 from a typical annual bill. The relief is due to end on Thursday, prompting EDF chief executive Simone Rossi to warn that the UK is "walking into a second energy crisis". Mr Rossi has called for the VAT cut on electricity to be extended beyond its current expiry date.

Cornwall Insight, however, expects the January position to be far worse than October's. Its latest forecast puts the typical annual bill at £1,999, a level that would be set under updated typical household consumption values. Ofgem will not publish the official January cap until late November, but principal consultant Craig Lowrey said a rise was "all but certain".

One reason the January increase looks unavoidable is timing. The window used to set the price for that cap is already halfway through, meaning much of the buying that determines January prices has already been done. With no clear signs of a truce in the Middle East and little evidence of falling international energy prices, there is limited scope for the eventual cap to come in below the forecast.

Mr Lowrey said the coming increase would be felt acutely. "These prices are going to hit households hard. January is already a difficult month for many, with cold weather and bank balances still recovering from Christmas," he said.

The forecast is driven by disruption to gas supplies linked to the conflict in the Middle East and the resulting low storage levels across Europe. Cornwall Insight warned that rebuilding those stocks could keep prices high "well beyond the winter" — suggesting this may be the start of a difficult period rather than a one-off spike.

The scale of any increase would be striking given recent history. The price cap peaked at £3,582 in July 2023 before falling to a low of £1,414 in July 2024. Since then it has fluctuated in a relatively narrow band, largely between around £1,543 and £1,655, with earlier projections for 2026 pointing to further rises to £1,584 in the first quarter and £1,663 by the third quarter. The new January forecast would undo all of that progress in a single step.

Cornwall Insight has built a strong reputation for its forecasting and is widely respected across both the energy industry and political circles, with suppliers making similar predictions. Even so, Mr Lowrey cautioned that the January figure remains only an estimate, and that an easing of Middle East tensions could ultimately soften the blow for billpayers.

For households on variable deals — which include millions on the cap, typically paying monthly by direct debit — a mid-winter increase of this size is a serious problem. Those on fixed tariffs, by contrast, are insulated until their deals expire.

Aaron Richards, from Maidenhead, is one of those feeling the squeeze. He said he was already cutting back on takeaways, working additional overtime and trying to budget more carefully. "But at the same time, we shouldn't have to," he said.

Mr Richards also drives a diesel car, meaning he is paying record high prices simply to get to and from work. "I just feel like everything's going up. How far is it going to go? Someone's got to step in," he said. He added: "I know people who can't afford to heat their house and they're struggling at the moment. Housing and eating are two of life's essentials that everyone should have. It shouldn't be a challenge to have any of those things."

The warning comes after years in which bills have stayed relatively elevated, leaving some households with substantial sums in arrears. Ofgem data shows customers collectively owe more than £5bn in unpaid bills and charges to suppliers.

The regulator has a proposed debt relief scheme on the table, and campaigners are pressing it to move ahead, while also urging the government to provide the funding needed to implement it. Adam Scorer, chief executive of fuel poverty charity National Energy Action, said: "This is unsustainable, not just for households but also for the market as a whole."

He called for the Budget to deliver additional targeted assistance for the households most at risk this winter, alongside measures to tackle accumulated energy debt and improve the least energy-efficient homes. With the official January decision not due until late November, households on the cap face several more weeks of uncertainty — and a forecast that suggests the worst of the winter is yet to come.