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

Millions of households face a steep climb in energy prices at the start of 2027, according to a forecast shared with the BBC, with the typical annual bill rising by £276 in a single step. That would amount to a 16% increase and the largest single rise in the price cap for four years. The projection comes from Cornwall Insight, a consultancy with a strong track record of energy price forecasting that is widely respected across industry and politics, and which has produced similar forecasts to those made by major suppliers.

The timing could not be worse. January is typically the most expensive month of the year for heating, and the increase lands just weeks after households have absorbed higher prices introduced under the autumn cap. Craig Lowrey, principal consultant at Cornwall Insight, said the coming rise would land when householders are already under pressure. "These prices are going to hit households hard," he said, pointing out that January brings cold weather at the same time as bank balances are still recovering from the Christmas spending period.

The immediate picture is one of a modest but unwelcome increase. About 20 million households across England, Scotland and Wales are on variable tariffs whose rates are set by the energy regulator Ofgem's price cap, which limits the maximum price charged for each unit of gas and electricity. Those households will see prices rise by 4% on Thursday, equivalent to roughly £60 a year, or about £5 a month. For a typical household using both fuels and paying by direct debit, that would lift the annualised bill to £1,723, assuming that level of usage continued for a full year.

That October increase would have been steeper had it not been for the government's cut to VAT on energy, which removes the equivalent of about £45 from a typical annual bill. The tax relief is among the measures now under pressure: Simone Rossi, chief executive of supplier EDF, warned that the UK is "walking into a second energy crisis" and called for the VAT cut on electricity, which kicks in on Thursday, to be extended beyond its current duration.

Cornwall Insight's January projection is far more dramatic by comparison. Its latest forecast puts the typical annual bill at £1,999, a level that assumes the regulator's new typical household consumption values are used to set the cap. The chart accompanying the forecast shows how volatile the cap has been: it stood at £1,673 for the first two periods from April to September 2022, surged to a peak of £3,582 in July 2023, then dropped to a low of £1,414 by July 2024. Since then it has fluctuated between about £1,543 and £1,655, rising to £1,584 for January to March 2026 and then to £1,663 by July to September 2026 — before the forecast jump of 16% in January.

The predicted surge is being driven by disruption to gas supplies linked to the conflict in the Middle East and the resulting low storage levels across Europe. Rebuilding depleted stocks, forecasters warn, could keep prices high well beyond the end of the winter. The forecast arrives a day before the autumn cap takes effect, and it adds to pressure on the government to support households who will struggle to pay their bills through the coldest months.

For now, however, the rise remains a projection rather than a decision. Ofgem will not confirm the actual January price until late November, and the window for setting the cap is already half gone. An easing of Middle East tensions could theoretically reduce the pain for billpayers, but Lowrey said that a January increase was "all but certain", given the lack of any clear sign of a truce or of falling international energy prices.

For Aaron Richards, a driver from Maidenhead, the cumulative effect of rising costs is already exhausting. He has tried to cut back on takeaways, work additional overtime and tighten his budgets, but he believes households should not have to make such sacrifices for heating and food. Like many drivers, he is also paying record high prices at the pumps for the diesel he needs to get to and from work.

"I just feel like everything's going up," Richards said. "How far is it going to go? Someone's got to step in." He added that he knows people who cannot afford to heat their homes and are already struggling. Housing and food, he argued, are basic necessities that should not be a challenge for anyone.

The strain is showing up in the figures on unpaid bills. After years of comparatively high domestic energy prices, Ofgem data shows customers collectively owe more than £5bn in unpaid bills and charges to suppliers. The regulator has a proposed debt relief scheme available, but campaigners have repeatedly urged Ofgem to move ahead with it and pressed ministers to provide the funding needed to implement it.

Adam Scorer, chief executive of the fuel poverty charity National Energy Action, said the situation was unsustainable for more than householders. "This is unsustainable, not just for households but also for the market as a whole," he said, adding that the Budget must deliver additional targeted support for those most at risk this winter, alongside action to tackle accumulated energy debt and to improve the least energy-efficient homes.