Energy Bills Forecast to Dip in January, but Higher Costs on the Horizon

Ahead of October’s Default Tariff Cap (price cap) rise, Cornwall Insight has released new forecasts for the January 2026 cap. The cap is currently forecast to fall quarter-on-quarter to £1,725 a year for a typical dual fuel household1, £30 lower than the October 2025 level of £1,755.

The forecast includes the expected introduction of the Nuclear Regulated Asset Base (RAB) levy to support the next generation of new nuclear power stations, which we forecast will add just under £10 per year to bills in the first quarter of 2026. Although Ofgem are still consulting on how to include this charge within the cap calculations, we anticipate that - from January - the RAB charge will be incorporated into the household bills, alongside an adjustment to account for the final two months of 2025, during which time suppliers will already be paying the RAB levy but not yet recouping from consumers.

While a dip in January bills would provide some short-term relief to households, this is expected to be short lived, as rising charges to operate and maintain Great Britain’s electricity and gas networks, alongside a slight increase in the RAB charge and other policy costs, are forecast to push the price cap approximately £100 higher in April 2026 compared with January.

With network costs rising, Ofgem is consulting on a proposal mandating that every supplier offer at least one tariff with a lower standing charge. While these could suit households that use very little energy, the trade-off is higher unit rates. That means most homes may not see savings, and for vulnerable customers, people in less efficient homes, or those with higher energy needs, the new tariffs could actually leave them worse off.

Calls for targeted social tariffs and other support measures are expected to grow as households face ongoing pressure on energy bills.

 Figure 1: Cornwall Insight’s Default Tariff Cap forecast (dual fuel, direct debit customer)

Source: Cornwall Insight’s Default Tariff Cap Forecast Service

Figure 2: Default Tariff Cap forecast, Per Unit Costs and Standing Charge (dual fuel, direct debit customer), without Nuclear RAB increase included

Note: All figures are national average unless otherwise stated. All intermediate and final calculations are rounded to two decimal places. Totals may not add due to rounding.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight:

"A dip in bills this January might come as a relief for households, but we shouldn’t mistake this as the start of a trend toward cheaper energy. The reduction we are forecasting is being driven by relatively small shifts in the wholesale market. At the same time, new charges like those to support nuclear development are starting to appear on bills, and that’s a sign of things to come.

“Any fall in January, would represent a pause rather than a permanent drop. By spring, costs are expected to rise again as network charges and policy costs increase. It’s a reminder that while wholesale prices may be softening, the costs of running and upgrading Britain’s energy system are moving in the opposite direction.

“Ultimately, adjusting bills, whether through lower standing charge tariffs or redistributing costs, won’t deliver meaningful savings. The only route to genuinely lower energy costs is a move toward secure, sustainable energy. That transition comes with an upfront price tag, and there needs to be an honest discussion about the costs, and what they mean for customers. The real challenge is how we support households through the shift, with targeted social tariffs playing a vital role. One thing for sure is that the price cap alone cannot solve this crisis.”

Reference:

1.      Ofgem’s Typical Domestic Consumption Values (TDCVs), are set at 2,700 kWh per annum for electricity, and 11,500 kWh per annum for gas.