LONDON / RankWire.AI / – British households enter winter with energy bills rising again as industry forecasts point to the sharpest increase in years. Energy UK said the average of current forecasts puts the January 2027 price cap at £2,077. That compares with £1,723 from October 1 through December 31. Ofgem raised the cap by 4% for the current quarter. The regulator says the cap protects around 22 million households on default tariffs across England, Scotland and Wales.
Energy UK said the projected level would approach the equivalent cost households faced during the 2022 energy crisis. The comparison reflects lower typical household consumption since that period. A £2,500 annual bill in 2022 terms equates to about £2,100 under current typical usage, according to its analysis. The government capped typical bills at £2,500 under the Energy Price Guarantee during winter 2022/23. A separate £400 support payment reduced the effective annual cost for a typical household at the time.
Another industry forecast also points to a steep increase from January. Cornwall Insight expects the price cap to reach £1,999 for a typical dual-fuel household. That would represent a 16% increase from the October cap and a rise of £276. It would also mark the largest quarterly increase since January 2023. Higher wholesale gas prices remain a major factor in household energy costs. European gas storage levels also entered September below their long-term average, adding pressure to wholesale markets.
Household energy debt reaches new highs
Financial pressure has also grown as more households fall behind on payments. Energy UK estimated domestic customer energy debt reached a record £6 billion during the first half of 2026. More than three million customers were in debt or arrears, with the average amount owed near £1,800. Ofgem reported combined domestic debt and arrears of £5.02 billion at the end of the second quarter. That figure was 13% higher than a year earlier and continued an upward trend seen since 2023.
The October price cap already represents a £60 annual increase for a typical dual-fuel household paying by direct debit. Average electricity prices stand at 26.32 pence per kilowatt hour, while gas averages 7.97 pence. Electricity standing charges average 54.83 pence a day, while gas standing charges average 29.68 pence. Actual household costs depend on consumption, location, meter type and payment method. Around 11 million households on fixed tariffs do not face the October default-tariff increase.
Electricity tax cut limits part of increase
The government removed VAT from household electricity bills from October 1, with the measure running through March 31, 2027. Gas bills continue to include 5% VAT. The tax change lowers electricity costs that would otherwise feed into household bills during the winter period. However, wholesale energy costs remain a major component of the price cap. The cap also includes network charges, supplier operating costs and other regulated allowances. Ofgem reviews the level every three months to reflect changes in underlying supply costs.
Energy debt remains another significant part of the winter outlook. Industry estimates indicate total domestic energy debt could reach £7 billion by the end of 2026. Ofgem data show average arrears without repayment plans reached £1,872 for electricity and £1,613 for gas in the second quarter. Nearly 1.19 million electricity customers and about 955,000 gas customers had arrears without repayment arrangements. The combination of higher regulated prices and record debt places household energy affordability back at levels not seen since the earlier energy crisis.