From 1 July 2025, UK households on standard variable tariffs will see an average reduction of £129 in their annual energy bills, as Ofgem lowers its price cap in response to falling wholesale gas prices. The revised cap brings the typical bill for a dual-fuel home paying by direct debit to £1,720, a 7% drop from the current level.
This is the first decrease in energy bills in over a year and marks a significant change in trend after successive hikes linked to the international energy crisis. Still, bills remain £152 higher than during the same period last year, and well above pre-crisis levels. The regulator’s price cap, reviewed quarterly, affects around 21 million households across England, Scotland and Wales.
Wholesale Gas Price Dip Drives the Cut
According to Ofgem, 90% of the reduction in the new price cap stems from a recent fall in international wholesale gas prices. The remaining savings arise from an updated calculation of operating cost allowances—what suppliers can recover through tariffs to cover service and infrastructure expenses.
This adjustment follows Ofgem’s first full review of operating costs since the cap’s introduction in 2019. Standing charges, the fixed daily fees covering the cost of connecting households to the grid, will also drop by around £19 a year on average for customers using direct debit or prepayment meters.
Ofgem has acknowledged the financial pressure on consumers and is consulting on further reforms to standing charge structures, aiming to improve affordability and transparency.
Despite the decrease, the regulator emphasised that the cap does not limit total energy bills, which depend on actual consumption. It encourages consumers to compare tariffs actively, as some fixed-rate deals may offer better value. Currently, 35% of households are on such fixed contracts, up from 15% a year ago, reflecting increased market options.
Energy Debt Remains a Major Concern
While the cap reduction offers short-term relief, energy affordability remains a critical issue. According to Citizens Advice, UK households collectively owe around £4 billion to energy suppliers. The organisation’s chief executive, Dame Clare Moriarty, described the change as “cold comfort” for the millions dealing with “a mountain of debt on top of their monthly costs”.
Ofgem’s Tim Jarvis, Director General of Markets, stated that the regulator is working closely with the government to build an energy system that is less exposed to fossil fuel volatility. “We’re also doing everything we can to support consumers today,” he said, highlighting ongoing efforts to introduce targeted debt relief measures ahead of the winter.
