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

Millions of households are braced for a sharp increase in energy prices in the middle of winter, with a leading forecaster projecting that the typical annual bill will climb by £276 when the price cap is reset in January. The prediction, from Cornwall Insight, would amount to a 16% rise and represent the largest single step-up in bills for four years.

The forecast lands at an especially unwelcome moment. The price-setting window for the January cap is already roughly halfway through, and the effects of disrupted gas supplies linked to the conflict in the Middle East have already fed into the wholesale market. With the UK's headline cap due to rise by 4% on Thursday, campaigners and industry figures warn the January change could come on top of an already unwelcome increase.

The current cap change, announced by regulator Ofgem, will lift prices for the roughly 20 million households in England, Scotland and Wales on variable tariffs — those whose rates are tied to Ofgem's cap, which limits the maximum price charged for each unit of gas and electricity. The 4% rise is worth about £60 a year, or roughly £5 a month, taking a typical dual-fuel household paying by direct debit to an annual bill of £1,723, assuming that level of consumption continued for a full year.

That increase would have been steeper had it not been for the government's cut to VAT on domestic energy, which is credited with shaving the equivalent of about £45 off a typical annual bill. EDF chief executive Simone Rossi has now called for the VAT relief on electricity, which is due to kick in — that is, expire — on Thursday, to be extended. He warned that the UK is "walking into a second energy crisis", pointing to the pressure on households arriving at the coldest point of the year.

Cornwall Insight's January projection takes the typical annual bill to £1,999. Craig Lowrey, principal consultant at the firm, said the timing is what makes the forecast so serious. Cold weather arrives just as household budgets are still absorbing the cost of Christmas, he said, meaning a rise of this scale would land when many families have least room to absorb it.

The chart accompanying the forecast shows how volatile the cap has been. Typical bills stood at £1,673 for the first two quarters of 2022, then surged to a peak of £3,582 in the July-to-September quarter of 2023 before falling back to a low of £1,414 in July 2024. From late 2024 through mid-2025 the cap fluctuated in a narrower band, between roughly £1,543 and £1,655, before edging up to an estimated £1,584 for January to March 2026 and £1,663 by July to September 2026. The £1,999 figure for January 2027 also reflects updated assumptions about typical household consumption.

Behind the January rise sits a supply problem rather than a demand one. Gas supplies have been disrupted by the conflict in the Middle East, and storage levels across Europe remain low as suppliers work to rebuild them. Lowrey said that rebuilding stocks to comfortable levels could keep prices elevated well beyond the end of the winter, rather than easing them quickly in the spring.

Cornwall Insight has built a strong reputation for the accuracy of its projections, and its forecasts are treated as credible across both industry and political circles. Similar forecasts have been made by energy suppliers. Even so, the January figure remains a projection: Ofgem will not publish the official decision until late November, meaning households will have to plan against an estimate rather than a confirmed number.

Lowrey said a rise in January now looks "all but certain", though he acknowledged that a cooling of tensions in the Middle East and a resulting fall in international energy prices could soften the eventual increase. The constraint, he noted, is timing — because the observation window for setting the January cap is already half gone, late changes in wholesale markets may not be fully reflected in the final number.

For households already under strain, the prospect is grim. Aaron Richards, from Maidenhead, said he has tried to cut back on takeaways, work more overtime and budget more carefully, but that this should not be necessary. He drives a diesel car and is also paying record high prices simply to get to and from work. "I just feel like everything's going up," he said, adding that he knows people struggling to heat their homes. Housing and food, he argued, are essentials that no one should have to treat as a luxury.

The cumulative strain is visible in the numbers of households falling behind. Recent Ofgem data shows customers collectively owe more than £5bn in unpaid bills and charges to suppliers, an accumulation built up over several years of relatively high domestic energy prices. Ofgem has a proposed debt relief scheme on the table, but campaigners have repeatedly pressed both the regulator and government to move, arguing that the scheme needs public funding before it can be put into effect.

Adam Scorer, chief executive of the fuel poverty charity National Energy Action, called the situation unsustainable — for households and for the wider energy market. He said the Budget must deliver additional, targeted support for the households most at risk this winter, alongside measures to tackle accumulated energy debt and to improve the least energy-efficient homes.

Taken together, the forecasts point to a difficult heating season, with the January cap decision in late November the moment households and campaigners will be watching most closely.