Inflation falls to 3% – but electricity bills jump 5.3% as households overpay £276 (aff)
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Inflation has eased to its lowest level in nearly a year, but electricity prices are rising again under the Ofgem cap – leaving many households paying hundreds more than they need to.
UK inflation fell to 3% in January – its lowest level since March 2025 – raising hopes of a spring interest rate cut. Petrol prices have eased, air fares have cooled sharply and food inflation has slowed to a nine-month low. But electricity bills are moving in the opposite direction.
The Office for National Statistics said electricity prices rose by 5.3% in the 12 months to January 2026, up from a 2.7% annual rise in December. On a monthly basis, electricity prices climbed 3.7%, compared with a 1.2% increase a year earlier.
The increase followed a change to the Office of Gas and Electricity Markets energy price cap in January. Ofgem estimates that for an average household paying by direct debit for dual fuel, the cap now equates to an annual bill of £1,758 – a rise of £3.
While headline inflation is easing, that £1,758 benchmark remains the reference point for many households on variable tariffs. By contrast, the cheapest fixed deal currently available is around £1,482, according to Ofgem data – a difference of £276 over the year.
Despite that potential saving, research from YouGov suggests 83% of Britons have not switched energy supplier in the past 12 months.
New market entrants say technology could help rebalance the system.
Greg Marsh, CEO of Nous, which has launched as an AI-powered household finance tool, said millions are paying more than they need to because the switching process is complex and time-consuming.
“The majority of households pay too much for their energy. Not because we’re careless, but because keeping track of everything is exhausting and time-consuming,” he said.
Households can check whether they are overpaying on gas and electricity using the Nous AI energy switching tool, which analyses your current tariff, compares providers and can handle the switch in minutes.
“The good news is that a typical household could save hundreds of pounds on their gas and electricity with Nous, and it only takes a few minutes to get going.”
The company says its AI-powered energy switching platform works out how much a household is overpaying, compares providers and identifies a fairer deal based on usage data before handling the switch. Nous describes its model as putting power back in the hands of consumers at a time when electricity inflation is accelerating even as the wider cost of living picture begins to improve.
For households still sitting on variable tariffs under the £1,758 cap, the gap between that figure and the cheapest fixed deals is likely to remain under scrutiny in the months ahead. Tools such as Nous’s automated bill management service are positioning themselves as a way to close that gap with minimal friction.
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