MILLIONS face a shock New Year’s Day hike in energy bills — to pay for nuclear expansion projects even while wholesale prices fall.

Industry “regulator” Ofgem announced today a surprise increase in gas and electricity costs from January.

Campaigners urged Chancellor Rachel Reeves to act in her Budget to help struggling families as freezing winter temperatures bite.

The government’s cap on energy prices is to go up by 0.2 per cent in the three months to March.

End Fuel Poverty Coalition co-ordinator Simon Francis said: “Energy bills remain stubbornly high as households face a fifth winter of the energy costs crisis. Today’s announcement sees standing charges rise yet again, highlighting the structural problems in how energy is paid for. 

“The addition of a new levy on bills which pays for nuclear power stations is unwelcome and could have been delayed until closer to when these plants actually start to generate electricity.”

The government this summer announced that taxpayers will effectively underwrite a private investment deal worth more than £38 billion to build Britain’s biggest nuclear project in a generation at the Sizewell C site on the Suffolk coast.

Billpayers face paying £1 a month for the costs from this winter until the project is complete under a funding mechanism that shields Sizewell’s investors from the impact of any delays — even if the total cost spirals to as much as £47bn.

An increase to standing charges — the amount consumers pay per day to have energy supplied to their homes — is largely due to costs linked to the government’s Warm Home Discount scheme.

Around 2.7 million more low-income households, including 900,000 families with children, are eligible for the £150 discount this winter.

Standing charges are set to rise by 2 per cent for electricity and 3 per cent for gas or 2p a day, from January 1 to March 31.

Mr Francis added: “Today’s Ofgem announcement keeps the average energy bill at almost £700 above the levels of winter 2020-21 and over £150 more than at the 2024 general election.

“Despite many people living in cold damp homes, the energy industry has posted more than £125bn in profits in the UK alone in recent years.

“Yet some business lobbyists have called for the Chancellor to end the windfall tax. Instead, next week’s Budget is a chance for the government to finally get serious about ending fuel poverty. 

“We need long-term investment in energy efficiency, not short-term thinking. We need action to bring down electricity prices, not excuses. And we need a fair tax regime that puts people before profiteers. 

“If the government truly wants to cut bills and protect the public, it must fully fund the warm homes plan, continue to improve our energy security, introduce a fair social tariff, and reform our broken energy pricing system.”

Uplift deputy director Robert Palmer said: “Even a slight increase is bad news for hard-pressed families. 

“It highlights why we need to decouple the cost of electricity from expensive gas-fired power plants which currently dictate the cost of bills. 

“And it shows why we must create a fairer system for all where energy companies aren’t allowed to rip us off and make billions in profits.”

Think tank Resolution Foundation’s principal economist Jonny Marshall said: “The unexpected and unwelcome rise in the energy price cap comes when Britain is at its coldest, with nearly half of all annual gas consumed in the first three months of the year.”

Energy consumers minister Martin McCluskey said: “We know that energy bills remain too high.

“We are also delivering our new golden age of nuclear, with cheaper, clean electricity to power millions of homes, kick-start economic growth and create thousands of jobs.”