Energy bills are projected to increase by nearly 4% for millions of households in October 2026, with a further predicted rise of 9% in January 2027, according to consultancy Cornwall Insight. This increase is attributed to ongoing volatility in the wholesale gas market, particularly due to events in the Gulf region. EDF has indicated that energy bills will likely remain high at least until the end of the decade.
The typical household's dual-fuel bill is now 70% higher than it was at the beginning of 2021, amounting to approximately £600 more annually than pre-crisis levels, as reported by Energy UK. This rise in energy costs has led to a record high in unpaid energy debt, with regulator Ofgem noting that unpaid bills exceeding three months have reached £6 billion, expected to rise to £7 billion by year-end.
The average household in debt, without a repayment plan, owes more than the typical annual bill, and the cost of covering this debt adds about £60 to the average annual bill. Consultancy Baringa estimates that this could increase to £100 by the end of the year.
There is increasing pressure on the government to assist those in need, with Ofgem proposing a debt relief scheme and calls for a discounted tariff based on benefits, health, and income data. Energy UK estimates that a targeted plan would cost £1.9 billion, significantly less than the £40 billion commitment made to protect bills after Russia's invasion of Ukraine.
The government faces challenges in funding such initiatives, with options including raising taxes, borrowing, or reallocating spending. Many households have reduced energy consumption, leading to a decrease in Ofgem's official calculations for typical energy usage.
Community warm hubs have gained popularity, providing spaces for individuals to access air conditioning during heatwaves. The heatwave has also decreased energy storage across Europe, contributing to price pressures.
The UK government and Ofgem aim to reduce reliance on gas, which is subject to volatile international pricing. In the short term, VAT on electricity bills will be cut in October, although this reduction is overshadowed by an 8% rise in gas prices. The new Chancellor, John Healey, faces limited options in addressing these challenges, with attention on his upcoming Budget following the increase in energy bills.