Energy prices are set to rise again in January 2025, according to consultancy Cornwall Insight, with many households bracing for a further £17 hike in their annual energy bills. This forecast comes at a time when many have already been struggling with high energy costs, and the rise signals that prices will remain above pre-crisis levels for the foreseeable future.
Cornwall Insight, renowned for its accurate predictions, expects the typical UK household’s energy bill to increase by 1%, reaching £1,736 a year in January. This follows a typical annual bill of £1,717, marking a modest yet significant rise. The increase is particularly concerning as the country heads into the colder winter months, when energy consumption traditionally spikes due to heating needs.
What Does the Energy Cap Mean for Consumers?
The rise is tied to the UK’s energy price cap, set by the energy regulator Ofgem, which limits the maximum price that can be charged for each unit of gas and electricity. It’s important to note that while the cap controls the cost per unit, it does not govern the total energy bill. This means that larger homes with higher energy consumption will see larger overall bills, while smaller homes will tend to pay less.
Currently, the energy price cap impacts approximately 29 million households across England, Wales, and Scotland. However, different rules apply in Northern Ireland, which has a separate energy regulation framework. Ofgem is expected to announce the next official quarterly price cap on Friday, but early forecasts suggest little change from the current levels, leaving many consumers bracing for more financial strain.
Ongoing Struggles for Vulnerable Households
Charities and advocacy groups have raised concerns about how vulnerable households, including pensioners and those on fixed incomes, will cope with the upcoming price hikes. With winter approaching, these groups fear that many people will face difficult decisions, such as cutting back on heating or other essential services, in order to manage their energy bills.
Dr. Craig Lowrey, principal consultant at Cornwall Insight, highlighted that while energy bills are unlikely to drop significantly, they will remain “largely unchanged” from the prices set in October. He added that the reality of high energy prices seems set to persist, with no clear signs of a return to pre-energy crisis levels. This situation is largely driven by geopolitical tensions, particularly the ongoing conflict between Russia and Ukraine, which has disrupted global energy markets. Additionally, issues such as bad weather and maintenance on Norwegian gas infrastructure are contributing to the continuing uncertainty.
The New Normal for Energy Prices
The consultancy further emphasized that the global energy market remains “very sensitive” to geopolitical and environmental factors. With these influences continuing to affect energy prices, it’s likely that the current higher prices will become the “new normal.” Cornwall Insight predicts that the energy price cap may experience a slight drop in April and October of 2025, but even then, prices are expected to remain well above historic norms.
This continued high cost of energy is not just an inconvenience for households but also a serious concern for policymakers. The government has been under pressure to introduce measures to protect the most vulnerable, particularly in light of its decision to withdraw the winter fuel payment for millions of pensioners. The removal of this benefit has sparked criticism, with some politicians and unions warning that it could endanger the health and well-being of older people and those with disabilities.
Legal Challenge Against Government Decisions
In Scotland, a legal challenge has emerged against both the UK and Scottish governments over the cuts to winter fuel payments. A couple in Scotland has been granted permission to pursue this challenge, arguing that the government’s actions disproportionately affect those who are most vulnerable during the colder months. The case highlights the growing public concern about energy affordability and the government’s approach to supporting those most in need.
The Labour government, under Chancellor Rachel Reeves, defended the withdrawal of the winter fuel payment as a necessary step to address a “financial black hole” inherited from the previous Conservative administration. However, many critics argue that the most vulnerable will suffer the most, particularly as the coldest months of the year approach.
Looking Ahead: Protecting the Vulnerable
As energy prices remain high, it’s clear that the government will need to consider further interventions to shield vulnerable households from the impact of rising costs. Experts suggest that measures such as social tariffs, which provide discounts or subsidies for low-income households, may be necessary to ensure that those least able to afford rising prices can still meet their basic energy needs.
With global energy prices remaining volatile and the UK facing another challenging winter, the need for effective and compassionate policy solutions has never been more urgent. As households prepare for the impact of rising bills in the New Year, many will be hoping for a stronger response to ensure that the most vulnerable are not left out in the cold.
