Households in the UK are set to face higher energy costs from April 2025, as Ofgem has announced a 6.4% increase in the energy price cap. According to Daily Mail, this adjustment will see the average annual energy bill for households on standard variable tariffs rise by £111 to £1,849.
The regulator cites rising wholesale prices as the primary reason for the increase, along with additional policy costs and inflationary pressures.
What Is the Energy Price Cap and Who Does It Affect?
The energy price cap is a limit set by Ofgem, the UK’s energy regulator, on the maximum amount suppliers can charge households for each unit of gas and electricity. It is designed to protect consumers from excessive charges while allowing suppliers to cover reasonable costs.
The cap is updated quarterly and applies to about 22 million households in England, Scotland, and Wales.
While the price cap sets limits on unit rates and standing charges, the total amount paid by consumers depends on their actual energy consumption. For many, this change will translate into an increase of £9.25 per month on their bills. However, costs may vary depending on location and payment method.
Regional Differences in Standing Charges
From April, standing charges will change, but there will be some regional variations. Electricity standing charges will drop to 53.8p per day, down from 60.97p, while gas standing charges will rise to 32.67p per day, compared to 31.65p previously.
Some households in London and the North Wales & Mersey region will see an additional increase of up to £20 per year.
The way consumers pay their bills will also impact their total costs. Those paying by direct debit will face an average bill of £1,849 per year.
Households using prepayment meters will pay slightly less, with an average bill of £1,803, while consumers paying by cash or cheque will see the highest costs, averaging £1,969 per year.
Fixed Tariffs: Should Consumers Switch?
With the upcoming price cap increase, Ofgem has encouraged consumers to consider switching to fixed-rate energy tariffs. Fixing a deal now could offer protection from future price hikes and provide more certainty over payments.
According to uSwitch, several fixed tariffs are currently available that undercut the new price cap, offering potential savings.
| Supplier | Tariff | Duration | Annual Cost | Savings vs. Cap |
|---|---|---|---|---|
| Outfox the Market | Fix’d Dual Feb25 v2.0 | 12 months | £1,650 | £199 |
| British Gas | Fixed Tariff V32 | 16 months | £1,677 | £172 |
| EDF Energy | Simply Fixed Jun26 | 16 months | £1,683 | £166 |
| So Energy | So Aspen Two Year – Green | 24 months | £1,682 | £167 |
These deals offer savings ranging from £123 to £199 compared to the new £1,849 cap. However, some tariffs come with exit fees, meaning consumers should carefully review terms before switching.
What’s driving the price increase?
The 6.4% increase is primarily due to fluctuations in wholesale gas prices, which account for 78% of the rise, according to Ofgem. Other contributing factors include inflation and policy costs.
The UK’s dependence on international gas markets has led to continued volatility, making energy prices difficult to predict.
Despite the current rise, some analysts, including those from Cornwall Insight, predict that prices could drop again in July 2025, potentially bringing energy costs closer to their current levels.
Their forecast suggests the price cap could fall to £1,756, which is still hundreds of pounds above pre-crisis levels.
With energy prices remaining high, many households are struggling to keep up with their bills. According to Citizens Advice, 6.7 million people in the UK are currently in debt to their energy supplier.
The total debt across the country has now reached £3.8 billion. To address this, Ofgem is considering a Debt Relief Scheme, which would allow suppliers to write off or match payments for customers with unmanageable debt.
Additionally, the government has announced plans to expand the Warm Home Discount scheme, providing eligible households with £150 off their annual energy bill.
With higher energy prices looming, there are several steps households can take to reduce their bills. Switching to a fixed tariff could be a viable option, as many fixed-rate deals are currently cheaper than the upcoming price cap.
Improving energy efficiency is another way to lower costs, for example, by turning down the boiler temperature, sealing drafts, and using appliances efficiently.
Households struggling with payments should contact their suppliers to explore available support schemes, as many providers offer financial assistance options for those in need.
