New forecast points to small drop in January energy bills
Household energy bills are forecast to dip slightly in the new year.
Consultancy Cornwall Insight, says the January to March 2026 price cap is likely to fall to £1,733 for a typical dual fuel customer, a drop of £22 from the current level.
The forecast was released after the observation window closed on 18 November. It suggests a modest fall driven mainly by slightly lower wholesale energy prices.
From January, the projection includes the planned introduction of the Nuclear Regulated Asset Base levy, expected to add a little over £10 a year to bills. The consultancy has also factored in Ofgem’s proposed rule changes, assuming they come into effect early next year.
The forecast keeps VAT at 5 per cent. Cornwall Insight says a cut to zero, if announced in the Budget, would lower annual bills by around £80.
Despite the expected fall in January, the consultancy warns that non-energy costs are now pushing bills up.
Its assessment for the April 2026 cap is around £75 higher than January, largely due to rising network charges for electricity transmission and gas distribution.
Wholesale energy prices are predicted to make up less than 40 per cent of the cap by the end of the decade.
The projected rise in April is likely to put pressure on the government to intervene, through changes to levies or VAT, social tariffs, or targeted support for vulnerable households. Measures in the upcoming Budget could affect the January figure and shape future caps.
Ofgem will confirm the official January to March cap on 21 November.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight, said:
“January’s price cap dip might look like good news, but it’s only part of the picture. Bills are still well above pre-crisis levels and are set to climb again in April, and this time, it’s not higher wholesale prices driving the rise.
“The government pledged to lower bills, on the promise that investment in renewables would reduce our reliance on global energy markets and stabilise bills. But what we’re seeing now is a shift, wholesale prices are no longer the main story. The real pressure is coming from rising non-energy costs, with levies and policy decisions associated with that investment in renewables driving up bills.
“While adjustments to subsidies or VAT may make a dent in bills, the government doesn’t have full control over many of the underlying non-wholesale costs. A large share is tied to the essential work of maintaining and operating the networks, the pipes, wires and infrastructure that keep energy flowing. That’s not something that can be switched off when prices rise, and it’s only going to grow as we build out the system for net zero.
“The shift to renewables will bring long-term stability and energy independence, but it’s not free. The upfront costs are real, and they’re landing on bills now. The challenge will be balancing short-term affordability with long-term resilience, and crucially making sure people understand why that trade-off matters. If the government doesn’t bring the public with them on the energy transition, then it risks undermining the very policies intended to support them.”
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