Household energy bills in Great Britain are predicted to reach almost £2,000 a year for the typical household from January, as the impact of the Middle East war continues through the coldest months of winter.
The government's cap on energy prices is poised to jump by 16%, equivalent to adding £276 to the average annual dual-fuel bill to take it to £1,999, according to the leading forecaster Cornwall Insight.
Biggest quarterly jump since January 2023
The consultancy's January forecast increase is well above its previous prediction of a 9% rise, with analysts blaming the uptick on the recent rise in gas market prices to three-year highs.
It would be the biggest quarterly jump since January 2023, when the energy crisis that followed the full-scale invasion of Ukraine the year before was at its height.
Craig Lowrey, a principal consultant at Cornwall Insight, said: "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, and now they face the biggest price cap rise we've seen in four years."
Political and industry reaction
The chief executive of the supplier EDF Energy, Simone Rossi, said the UK was "walking into a second energy crisis". Speaking to the BBC, he called for the government to do more to lower domestic bills after its six-month VAT holiday, which will save the typical home about £45 a year from Thursday.
Andy Burnham said he would not call Rossi's crisis warning an overstatement, telling BBC Radio 4's Today programme that the rising cost of home energy, as well as pump prices, was "very difficult indeed".
In response to questions over whether the government would consider abandoning the planned fuel duty rise, the prime minister said "every possible measure" was being considered to ease energy costs, adding: "We're looking at any measure that can give people breathing space, that can take the pressure off."
Fuel poverty concerns and market drivers
Cornwall's latest forecast reignited calls for the government to offer targeted support to struggling households this winter. Simon Francis, a coordinator at the Energy Fuel Poverty Coalition, said the number of households in fuel poverty was set to rise again "at the most dangerous time of the year".
He said: "The chancellor has no choice but to act to provide increased targeted support to vulnerable households and plan to deliver wider universal help for people facing a sixth winter of high energy prices.
"If ministers do nothing, millions will spend this winter in cold, damp homes, unable to cook a hot meal. People will get ill. Some will die. And every one of those avoidable cases will be on this chancellor's watch."
Gas prices in Europe have doubled in recent months as the continent prepares to enter the cooler months with gas stores at their lowest level in 13 years after the US-Israel war on Iran triggered an increase in global market prices.
Buyers have delayed refilling storage facilities after a cold end to last winter, and extra gas power generation during the summer heatwaves, depleted stocks while oil and gas exports from the Gulf remain severely disrupted by threats to tankers passing through the Hormuz and Bab al-Mandab straits.
Cornwall Insight said storage levels of EU gas were now at their lowest September level for 15 years.
Price cap details and outlook
The energy regulator for Great Britain, Ofgem, sets the government's price cap. It will base January's figure on wholesale prices between 19 August and 17 November, so the outlook could still change if market prices drop, but Cornwall Insight said an increase was "all but certain" given the rises so far this month.
From this Thursday the cap rises to the equivalent to £1,723 a year for a typical home's gas and electricity use. The unit cost of electricity will rise from 26.11p a kilowatt hour to 26.32p, while gas charges will rise from 7.33p to 7.97p. However, actual household bills will depend on how much each consumes.
