Energy bills are set to rise by 4% from October 1, reaching their highest level in three years, according to the final forecast from Cornwall Insight. The annual price cap is expected to increase to £1,729 from the current £1,663, a rise of £66 for the average household.
This increase will push bills to their highest point since July 2023, driven primarily by ongoing uncertainty over the US-Iran conflict. Wholesale prices for the coming winter have risen to their highest level in almost four years, with the Middle East situation affecting the ability of European gas storage operators to refill stocks ahead of winter. Gas-in-store levels remain at historic lows for this time of year.
Impact on Households
The rise comes as a particular blow to households already struggling with the cost of living. Dr Craig Lowrey, Principal Consultant at Cornwall Insight, said: “Rising energy bills aren’t welcome at the best of times, but with winter approaching, this latest hike will hit struggling households especially hard.”
He added: “Driven by international conflict rather than domestic policy, it is a stark reminder that our energy bills remain tied to events thousands of miles away. Moments like this are the strongest argument for reducing Britain’s reliance on volatile international gas.”
Government Response and VAT Cut
The forecast comes as Labour Party Prime Minister Andy Burnham has proposed a £45 VAT cut on energy bills to provide temporary relief. However, Dr Lowrey warned that such measures do not address the underlying issue of Britain's dependence on imported natural gas.
“While temporary relief like VAT cuts help soften the blow, they don’t touch the underlying fact that Britain is heavily dependent on imports of natural gas. As long as we're exposed to global markets, the risk of these price shocks will remain,” he said.
Long-Term Energy Security
Dr Lowrey also commented on the government's clean power ambitions, noting that the new Energy Secretary has hinted at a more flexible approach to the clean power timeline. He said: “While the government remains committed to delivering homegrown power, the new Energy Secretary has hinted at a more flexible approach to the clean power timeline.”
He continued: “That reflects a genuine challenge, while greater energy independence should help protect consumers from these kinds of price rises in the future, the costs of delivering the transition are often felt hardest by those who can least afford it. The minister’s true challenge will be achieving long-term energy security without overburdening vulnerable households today.”
The £1,729 cap will apply from October 1, with the next review due in January. The rise underscores the ongoing volatility in global energy markets and the challenges facing UK households as they head into the winter months.
