Energy bills are about to get a lot worse. Cornwall Insight, the consultancy whose forecasts the industry and Whitehall take seriously, reckons the typical household will see annual costs hit £1,999 in January. That is a jump of £276 from the current level, a 16 per cent rise, and the biggest single increase in four years. The forecast landed just before Ofgem’s new price cap took effect on 1 October, which itself pushed bills up by 4 per cent, or about £60 a year, to £1,723 for those paying by direct debit.
That October rise was softened by the government’s decision to scrap VAT on electricity bills for six months. Without that, the cap would have been roughly £45 higher. About 22 million households are on default tariffs covered by the cap. The rest are on fixed deals and won’t feel the immediate pinch, though their time will come when those deals expire.
The VAT cut is funded by cancelling the Digital ID programme, which was supposed to cost £1.8bn over three years. Andy Burnham, who became Prime Minister in July, called it one of his first acts to give people “breathing space”. It saves the average household about £45 a year. Six million of the poorest households will also get the £150 Warm Home Discount this winter. The government has framed these as targeted interventions. The numbers suggest they are drops in a very large bucket.
Simone Rossi, the boss of EDF in the UK, did not mince his words. He warned Britain is entering a second energy crisis and called for the VAT cut to be extended beyond March. Burnham, speaking on BBC Radio 4’s Today programme, agreed the warning was not exaggerated. He said the cost of energy and fuel had become “extremely burdensome” for ordinary people. At the Labour conference in Liverpool, he said the government was looking at every possible measure to ease the pressure.
The cause is straightforward and largely outside Britain’s control. Gas supply disruptions linked to conflict in the Middle East have left European storage levels worryingly low. Rebuilding those reserves will keep prices high well beyond winter. Craig Lowrey, principal consultant at Cornwall Insight, said the January spike will hit household budgets hard because temperatures drop and bank accounts are still recovering from Christmas. He called the increase “essentially certain”.
The debt picture is ugly. Energy UK reported that unpaid household energy bills reached £6bn by the end of June, with a warning that the figure could hit £7bn by December. That debt gets spread across everyone’s bills, adding about £50 a year to the typical household. More than three million households are in arrears, owing an average of £1,800 each. StepChange found its clients owed an average of £2,673 in energy arrears in the first half of 2026, up by more than £200 on last year.
Polling by YouGov found 29 per cent of adults in Great Britain are worried about paying energy bills over the next six months. Nearly half of those paying bills have already cut back on energy use. A debt relief scheme that would have wiped £500m from the poorest customers’ bills has stalled because it needs legislation. Energy UK’s chief executive, Dhara Vyas, said the country should not rely on temporary measures but needs a more targeted and lasting way to help people when they need it most.
The broader picture is not pretty either. Full Fact has repeatedly debunked viral claims that UK energy bills are the highest in Europe. Official data shows UK domestic electricity unit prices are among the highest in Europe, but gas prices are generally below the median. That is cold comfort when gas is what heats most British homes and gas prices are driving the January increase. Ofgem’s own figures show wholesale gas costs rose 13 per cent in the last quarter, with electricity wholesale costs up 10 per cent.
Ofgem will announce the official January cap on 25 November. The period used to calculate it has already passed. Unless something dramatic happens in the Middle East or wholesale markets, the £1,999 figure is as close to a certainty as these things get. The government’s VAT cut expires at the end of March. After that, the full weight of the January rise will be felt with nothing to offset it.
