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Energy bills will rise from 1 April 2025, when the new Ofgem energy price cap kicks in. The regulator has announced that the cap will rise from £1,738 to £1,849 a year, a 6.4% rise. This is 9.4% (£159) higher than this time last year (£1,690) but £531 (22%) lower than at the height of the energy crisis at the start of 2023, when the Energy Price Guarantee was in place.
Ofgem said a recent spike in wholesale prices was the main driver of the price rise, alongside a small increase in policy costs and associated inflationary pressures. The rise in the price cap was widely predicted after colder weather and limited renewables drained gas storage levels across Europe.
Commenting on the announcement, Joanna Elson CBE, chief executive at Independent Age, said: “The price cap announcement is more bad news for the older people in poverty that have already been subjected to a brutally long and cold winter.
“People in later life on low fixed incomes have stretched their budgets to breaking point during the colder months, and many tell us they don’t have enough money to turn the heating on full stop. Now, their bills rise yet again to amounts they simply cannot afford.”
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The energy price cap sets the maximum amount energy suppliers can charge for standing charges and each unit of energy to customers on a standard variable tariff. The cap changes on a quarterly basis and is announced by Ofgem about six weeks before it takes effect.
The rise in April will see the typical annual bill rise by £111, or about £9.25 a month. The annual figure is calculated on a household with typical use – the actual amount you pay will depend on your energy supplier, how much energy your household uses, where you live, and the type of energy meter you have.
Under the new price cap, direct debit customers will pay a maximum of 6.99p per kWh for gas (up from 6.34p), and 27.03p per kWh for electricity (up from 24.86p). The daily standing charge for electricity will be a maximum of 53.80p (down from 60.97p) and the daily standing charge for gas will be capped at 32.67p (up from 31.65p).
Households who don’t pay by monthly direct debit face higher costs. From 1 April, those who pay on receipt of a bill will pay an average of £1,969 a year for energy.
Analysts at consultancy Cornwall Insight are expecting the next price cap – for July to September – to be lower than the April to June level, with price rises again from October. But it has not yet released exact figures for its forecasts.
Some energy companies also predict energy price cap moves – but they are divided on what they think will happen. EDF Energy predicts the cap will fall in July, while British Gas and E.On think it will go up.
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Fixed tariffs work by locking in set unit rates for gas and electricity, and standing charges for a specific period. Fixes are usually for 12, 18 or 24 months. Richard Neudegg, director of regulation at Uswitch.com, is urging households to switch to a fixed deal.
He says: “The cheapest fix on the market, currently from Outfox the Market, could save the average household around £179 per year versus the April price cap. The larger suppliers are also vying for customers. The cheapest large supplier fixed deal is from British Gas and could save the average household around £172 per year against the April rates. Households still sitting on a deal linked to the price cap can absolutely beat the upcoming hike. We urge anyone who hasn’t switched in a year or more to see what savings they can make.”
Most fixed-rate tariffs have exit fees if you later decide the tariff isn’t for you after all, or you find a better deal. Outfox the Market, for example, currently charges £25 per fuel in exit fees, while British Gas is at the more expensive end, charging £50 per fuel. This means it’s worth thinking carefully before you switch.
Les Roberts, an energy comparison expert at Bionic, says: “If you do find a deal with rates below the new price cap rates, then it could be worth considering making the switch, as we don’t know what will happen to energy prices in the future. However, it's important to remember that price-capped tariffs change every three months in line with the price cap, so a deal that looks good now could end up being more expensive if energy prices drop later in the year.
Emily Seymour, energy editor at Which?, adds: “You should compare what your monthly payments would be on a fixed deal with what you'd expect them to be if you remain with the price-capped variable tariff to see what the best option is for you.
“As a rule of thumb, we'd recommend looking for deals cheaper than the price cap, not longer than 12 months and without significant exit fees.” When you’re shopping around, it’s best to use a price comparison website to work out if a fixed tariff can save you money.
These sites can use data from your previous bills, such as how many units of energy you use or how much you pay on your current tariff, to calculate if you could save money by switching deals.
Ofcom is also currently consulting on proposals to require all energy suppliers to offer a low or zero standing charge tariff alongside existing tariffs – albeit with higher unit rates. These deals would also be controlled by the price cap.
A standing charge is a flat daily fee that covers the cost of connecting your home to the gas and electricity supply. These fees have attracted criticism as they disproportionately affect households that use less energy.
Under the April price cap, a household using zero gas and electricity for a whole year would still pay more than £315 a year to their energy company. No or low standing charge tariffs could be in place for winter 2025/26, giving UK households more choice about how they pay for the energy they use.
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