Heating bills to soar again in January as inflation surges

Energy bills are set to soar by a quarter despite a recent fall in oil and gas prices, official figures are due to confirm.

The annual cost of heating a typical home is likely to surge by £443 to £2,166 in January, according to EDF.

It comes as the assessment period for calculating the new energy price cap ends on Tuesday. 

The price cap, which affects 22 million households on a standard variable tariff, is based on the average wholesale cost of energy during a 90-day ‘observation period’.

Oil and gas prices have remained stubbornly high, with a barrel of Brent crude hitting $117 last month as the Iran war dragged on, before slipping below $100 at the start of this month as hope of an end to the nine-month conflict rose. 

But that was too little, too late to prevent the 26 per cent rise predicted by EDF.

Higher energy bills will also make another interest rate rise more likely.

Watch out: Energy bills are set to soar by a quarter despite a recent fall in oil and gas prices

Bank of England Governor Andrew Bailey recently warned that a surge in inflation to 5 per cent in the first half of next year was ‘quite baked in’ because of how the energy price cap works.

Traders now expect the Bank’s base rate to rise to 4.25 per cent next month in a pre-Christmas blow to borrowers.

Chancellor John Healey is also drawing up contingency plans in case the Middle East conflict flares up again. 

He told MPs last week that he was leading a new response group of senior Treasury officials.

It meets weekly to decide what to do ‘if some of the worst scenarios come to pass and the war escalates’, he said, adding that a further cost-of-living support package ‘should that be necessary’ was not ruled out. 

He said: ‘Ending the conflict would be the single best economic policy for Britain.’

The Chancellor has already tried to cushion the blow from the latest energy shock. Measures include a £100 handout from January for 20million households in council tax bands A to D in England.

Daily standing charges for gas will also be scrapped from as early as next year, meaning households that use more gas pay more, while those who use less pay less.

Other moves include extending the removal of VAT on electricity bills and a 5p-a-litre cut in fuel duty.

Experts say the £100 payment will take some of the sting out of bills this winter, but other measures will take time to show up.

The energy price cap determines the maximum unit rates and daily standing charges that energy providers can charge. The new tariff, which applies to dual-fuel households paying by direct debit, will run until the end of March.

It will be confirmed by energy regulator Ofgem at the end of this month, but will not affect the 11million households on fixed-rate contracts who won’t see a change to their unit rates.

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