UK energy bills rise 4% as January forecast points to 16% jump

Millions of households in England, Scotland and Wales are facing another sharp rise in energy costs. The latest forecasts warn that January bills could jump by 16% after an immediate 4% increase.

The energy price cap has risen by 4%, adding around £60 a year to a typical household bill and taking it from £1,663 to £1,723. The government has removed VAT from household electricity bills, saving about £45 a year. Without that, the increase would have been higher. The cap affects about 20 million households on variable tariffs.

Forecasters at Cornwall Insight now expect the cap to rise by a further 16% in January. That would add around £276 to a typical annual dual fuel bill and take it to just under £2,000, or £1,999. It would be the biggest increase in four years, and it lands in the coldest and darkest part of winter. Suppliers and analysts say the exact figure could still change because the forecast period is only halfway through.

The pressure comes from wholesale gas markets, which have been disrupted by the war in Ukraine and conflict in the Middle East. Diesel prices are also near record levels, averaging just under £2 a litre, partly because of refinery constraints and disruption around the Strait of Hormuz. EDF chief executive Simone Rossi said the UK is walking into a second significant energy crisis. The Prime Minister, Andy Burnham, said the warning was not an overstatement. He said the VAT cut on bills should be extended and that reopening the Strait of Hormuz was an urgent international priority.

There are already signs of financial strain. Households owe more than £5 billion in unpaid energy bills. Charities and suppliers are calling for targeted help in the Budget, which is less than a month away. Options include: - a boost to the Warm Home Discount, which gives £150 off winter bills for people on benefits - a social tariff for vulnerable households - relief from some of the debt - extending the VAT cut beyond April

Consumers are being advised to check fixed deals, watch their usage and look at insulation and draught proofing. There has been a switching surge, with the best fixed deal potentially saving £355 compared with the January forecast. The debt charity StepChange urged anyone struggling to speak to their supplier rather than avoid the problem.

The forecast has also sparked a political row. Labour had promised to help families save up to £300 on energy bills before the election, but critics say bills have instead moved from around £1,600 towards £2,000. Some energy analysts and commentators argue that net zero and renewable subsidies are adding to costs, and that North Sea gas fields such as Jackdaw and Rosebank should be approved. Others say those fields would not directly lower consumer bills because their output would be sold on international markets, and that insulation and targeted support are better answers.

The government is under pressure to find more help for households in the Budget, while warning that the main drivers of the price spike are beyond its control. For now, the outlook is for a difficult winter, with bills close to the levels seen during the last energy crisis.