The new energy price cap will be in place from 1st January 2025 to 31st March 2025 and is set by Ofgem, the energy regulator. While the cap will be £21 more per year than the previous energy price cap set in October 2024, it is £180 per year less than in January 2024 and £2,321 less per year compared to January 2023, when energy prices hit their peak.
With rising inflation and recent cuts to the winter fuel payment, many will be concerned about another increase in energy costs. Below, we explain why energy bills are going up, how much you will pay under the new price cap and also what you can do if you are struggling to pay your energy bills.
Why have energy prices risen again?
The war in Ukraine continues to impact the energy market and gas and electricity suppliers are facing higher prices, which are being passed on to consumers. While prices have risen, a 1.2% hike is far lower than the 10% hike we experienced in October. Craig Lowrey, principal consultant at energy analysts Cornwall Insight stated "Supply concerns have kept the market as volatile as earlier in the year, and additional charges have remained relatively stable, so prices have stayed flat. While we may have seen this coming, the news that prices will not drop from the rises in the autumn will still be disappointing to many as we move into the colder months".
What is the energy price cap?
The energy price cap was introduced by the government's energy regulator Ofgem (Office of Gas and Electricity Markets) to control the maximum amount that providers are allowed to charge consumers for each unit of gas and electricity. Prior to the energy crisis, the price cap was reviewed every six months. However, with the wholesale energy market experiencing unprecedented volatility in 2022, Ofgem moved to a quarterly price cap review. The energy price cap represents the average annual dual-fuel household bill that is paid via direct debit.
The energy price cap is based on the average dual-fuel household bill and how much you will actually pay will vary depending on how much energy you use.
Energy price cap figures - 2019 to 2025
Below is a brief history of energy price cap figures going back to 2019.
| Date Energy Price Cap is effective from | Energy Price Cap |
| 1st October 2019 | £1,089 |
| 1st April 2020 | £1,073 |
| 1st October 2020 | £993 |
| 1st April 2021 | £1,084 |
| 1st October 2021 | £1,216 |
| 1st April 2022 | £1,887 |
| 1st October 2022 | £3,371 |
| 1st January 2023 | £4,059 |
| 1st April 2023 | £3,116 |
| 1st July 2023 | £1,976 |
| 1st October 2023 | £1,834 |
| 1st January 2024 | £1,928 |
| 1st April 2024 | £1,690 |
| 1st July 2024 | £1,568 |
| 1st October 2024 | £1,717 |
| 1st January 2025 | £1,738 |
How much will you pay for energy under the new price cap?
The following table shows how much you can now expect to pay for each unit of gas and electricity. The figures will vary depending on where you live in the UK. Remember, the amount you pay under the new price cap will be based on your energy usage and the charges stated below, assuming you pay by direct debit.
| Current energy price per unit
(1st October - 30th December 2024) |
New energy price per unit
(1st January - 31st March 2025) |
|
| Electricity | Daily Standing charge: 60.99p
Unit price per kWh: 24.50p |
Daily Standing charge: 60.97p
Unit price per kWh: 24.86p |
| Gas | Daily Standing charge: 31.66p
Unit price per kWh: 6.24p |
Daily Standing charge: 31.65p
Unit price per kWh: 6.34p |
(Source: Ofgem)
Those without a smart meter should make a note to take a meter reading as close to the 31st December as possible so as to ensure your readings are accurate and you pay the correct price for your energy.
What will happen to the energy price cap in the future?
According to the latest predictions from energy analysts Cornwall Insight, the energy price cap could fall to around £1,713 in April 2025, the next point at which it can change. However, Energy supplier EDF has a price cap forecasting service that predicts that prices could go up a further 2% to around £1,777 per year. What this goes to show is that energy price forecasting is complex and there is no certainty as to whether energy prices will rise or fall in the future. Ultimately, there are many factors that can influence the wholesale market price for gas and electricity, so if you are worried about future price rises, you may be better off considering a fixed price tariff. We explain more below.
Is now a good time to switch to a fixed energy tariff?
In response to the latest energy price cap increase, Tim Jarvis, a spokesperson for Ofgem said "We understand that the cost of energy remains a challenge for too many households, however, with more tariffs coming into the market, there are ways for customers to bring their bill down so please shop around and look at all the options."
The energy price cap changes every 3 months, while fixed deals typically last 12 or 24 months. The danger with fixing your energy costs is that should you fix, a better deal may be just around the corner. Conversely, however, a fix may result in a relatively low bill if prices subsequently soar. The real benefit to fixing your energy deal is the assurance that you know exactly what you will be paying for your energy over a set period. While better deals could come to market during your fixed period, you are protected should there be a sudden surge in energy prices. However, there are more energy deals coming to market that do not charge exit fees, leaving customers free to switch if a better deal becomes available.
We cover this tariff in more detail as well as a roundup of the best fixed-price energy tariffs on the market in our article 'What is the cheapest fixed price energy tariff? - Best deals compared'.
What to do if you're struggling to afford your energy bills
If the cost of energy is becoming overwhelming then your energy supplier may be able to help you arrange an affordable repayment plan. We provide some tips if you are struggling to afford your energy bills in our article 'How to save money on your energy bills'. There are also a number of grants and schemes available for those who are most vulnerable. More information and help on the cost of living can be found in our Cost of Living guide.
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