Household energy bills forecast to see biggest rise in four years

Household energy bills forecast to see biggest rise in four years

Household energy prices are expected to surge in January, with a typical annual bill predicted to rise by £276, according to figures shared with the BBC.

The forecast 16% increase would affect millions of households at the coldest time of year, and would be the largest rise in bills for four years.

The projection from consultancy Cornwall Insight comes a day before prices rise under regulator Ofgem's October price cap, adding pressure on the government to help those who may struggle to pay.

Meanwhile, EDF supplier boss Simone Rossi has warned that the UK is "walking into a second energy crisis" and has called for an extension to the VAT cut on electricity, which takes effect on Thursday.

Around 20 million households in England, Scotland and Wales are on variable energy tariffs set by Ofgem's price cap, which sets a maximum charge for each unit of gas and electricity.

Those homes will face a 4% rise in prices on Thursday, equal to about £60 a year — or £5 a month — taking an annual bill to £1,723 for the typical household using both electricity and gas and paying by direct debit if that level were maintained for a year.

That increase would have been larger without the government's VAT cut, which reduces a typical bill by the equivalent of about £45 a year.

But forecasts indicate a much bigger jump could hit bills in January. Cornwall Insight said its latest forecast points to a typical annual bill rising to £1,999.

According to Craig Lowrey, principal consultant at Cornwall Insight, the predicted 16% increase will arrive at the worst possible time of year.

"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 expected rise is being driven by disruption to gas supplies because of the conflict in the Middle East, along with low gas storage levels in Europe. Rebuilding those reserves could leave bills high "well beyond the winter", the forecaster said.

Cornwall Insight has a strong record on forecasts and is widely respected across industry and politics. Similar predictions have also been made by energy suppliers.

This is still only a forecast at this stage. Ofgem will not announce the actual January price change until late November.

Although easing tensions in the Middle East could reduce the impact on billpayers, the pricing period for the January cap is already halfway through.

With little sign of a truce or lower international energy costs, a sharp rise for those not on a fixed tariff appears highly likely. Lowrey said a January increase was "all but certain".

That will be difficult for people like Aaron Richards from Maidenhead.

"I try to eat less takeaways, work more overtime, and try to budget a bit better, but at the same time, we shouldn't have to," he said.

Aaron drives a diesel car, and so is paying record high prices to travel 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.

"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."

Years of relatively high domestic energy bills have left some people facing large unpaid balances.

Recent Ofgem data showed that customers collectively owe more than £5bn in unpaid bills and charges to suppliers.

The regulator has a proposed debt relief scheme ready, and campaigners continue to urge it to proceed, calling on the government to fund its implementation.

"This is unsustainable, not just for households but also for the market as a whole," said Adam Scorer, chief executive of fuel poverty charity National Energy Action.

"The Budget must deliver additional targeted support for households most at risk this winter, alongside action to tackle energy debt and improve the least energy-efficient homes."

Among those also calling for government help for struggling billpayers is Simone Rossi, chief executive of supplier EDF Energy.

On the Big Boss Interview podcast, Mr Rossi said: "We are actually walking into a second significant energy crisis after the one we experienced just four years ago."

He said the government should extend the cut in VAT on electricity bills from 5% to 0% beyond April, when it is due to expire.

He also urged ministers to approve the new Jackdaw gas field off the coast of Aberdeen, and the Rosebank oil field off Shetland.

The government has repeatedly said it will consider ways to give billpayers breathing space on the cost of living.