January Blues for Consumers as Energy Prices Set to Rise

British households are facing another increase in energy bills from January 2025, according to forecasts from leading consultancy Cornwall Insight.

Experts expect the typical annual energy bill to rise to £1,736, up from the current average of £1,717. While £19 a year may seem modest, it represents a 1% hike, adding to the financial strain on consumers in the depth of winter.

What is Ofgem Doing?

The UK’s energy regulator will announce its new quarterly price cap this month–a decision that will directly impact 29 million households across England, Wales and Scotland.

The price cap, which limits the maximum cost per unit of gas and electricity, is designed to protect consumers from sharp price hikes. However, it doesn’t cap the total bill, meaning households with high energy usage still see significant costs.

Concern for Vulnerable Groups

With temperatures dropping sharply in November and demand for heating increasing, the upcoming rise has prompted concern from charities and advocacy groups. Director of Policy at National Energy Action, Peter Smith, said: "People are already rationing their energy use or building up debt to keep warm. With increased wholesale prices in the last few months, there won't be any let up in the unaffordable cost of energy.”

Dr Craig Lowrey, a principal consultant at Cornwall Insight, said: “What we've been looking at were prices well above the historic norms. There doesn't seem to be any sign of a return to pre-energy crisis levels."

Dr Lowrey’s claim refers to the cost spike when the conflict between Russia and Ukraine began in 2022. The global energy market remains volatile, worsened by fresh geopolitical tensions. The consultancy describes these sustained high prices as the "new normal".

Impact on Pensioners

The anticipated rise in energy costs coincides with recent changes to national support schemes. Keir Starmer’s Labour government has faced backlash for its decision to restrict winter fuel payments, which could leave millions of pensioners without this crucial financial support.

Under Chancellor Rachel Reeves' first Budget, the winter fuel payment will now only be available to those receiving pension credit or other means-tested benefits, a change the Government blames on the need to address a financial deficit.

Critics argue that this cut will leave many older and disabled people at risk, forced to choose between heating their homes and buying essentials. In response, a couple in Scotland initiated a legal challenge against the UK and Scottish governments over the changes.

Long-Term Outlook

Looking further ahead, Cornwall Insight predicts a slight decrease in the energy price cap by April and October 2025. However, this projected dip is unlikely to provide any significant relief in the short term.

The consultancy has called on the Government to consider implementing targeted measures, such as social tariffs, to protect vulnerable households from persistently high costs.

How Can I Save Money on Energy Bills?

With uncertainty over high energy bills and the current state of the UK energy market, consumers are looking for ways to save money on their energy more than ever. At UKPower, we can help you compare gas and electricity suppliers to find the cheapest energy prices, switch to a better deal and cut the cost of your energy bills.

Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.

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