Finance30 September, 20262 min read
Ofgem Raises Energy Price Cap 4% From £1,663 To £1,723, Cornwall Insight Forecasts 16% January Jump
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Ofgem raised the cap by 4% to £1,723 for typical dual-fuel households. Cornwall Insight forecasts a 16% January jump in bills.
Cap rises, bills jump
Ofgem’s energy price cap is set to rise by 4% on Thursday, pushing the average annual household energy bill from £1,663 to £1,723 for a typical dual-fuel home paying by Direct Debit if that level were sustained for a year. Cornwall Insight forecast a further 16% jump in January, taking the typical annual bill to £1,999 and adding £276 compared with the level between October and December.
Craig Lowrey said, "These prices are going to hit households hard," and he warned that January is already difficult with "cold weather and bank balances still recovering from Christmas." Simone Rossi warned the UK is "walking into a second energy crisis" and called for an extension to the VAT cut on electricity, which starts on Thursday (October 1).
Policy response and pressure
Prime Minister Andy Burnham told BBC Radio 4's Today programme he would not call Rossi's crisis warning an overstatement and said the cost of home energy was "very difficult indeed." Burnham said, "We're looking at any measure that can give people breathing space, that can take the pressure off," and he proposed removing VAT from energy bills, expected to save the average household around £45 a year.
About 20 million households in England, Scotland and Wales are on variable energy tariffs set by Ofgem's price cap, and those homes would see a 4% increase on Thursday. Ofgem would not announce the actual January price change until late November, while Cornwall Insight said a January rise was "all but certain."
Broader squeeze and markets
Cornwall Insights warned the next price cap increase in January could bring a typical annual bill to £1,999, while bills would rise tomorrow by 4 per cent in line with Ofgem’s price cap increase. This is Money reported that experts forecast food inflation could hit 6.6 per cent in 2027 and remain almost as high in 2028, adding to a cost-of-living squeeze alongside energy bills.
This is Money also cited Bloomberg Economics analysis that the energy price cap set by Ofgem could rise by 25 per cent at the start of the year, lifting typical annual bills by £427 to £2,150. Simon Williams of the RAC said, "Unfortunately for hard-pressed drivers, prices look set to keep on rising due to the cost of a barrel of oil consistently trading over the $100 mark," as the article described petrol prices past £1.70 a litre and diesel nearly £1.93.