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The Ofgem price cap isn’t a total limit on your bill, and instead it limits the unit cost of energy. So the more you use, the higher your bills will be.
The current price cap means the average annual energy bill costs £1,717 and it will remain at this level until 31 December. From 1 July to 30 September it was £1,568, meaning it has increased by 10% – Ofgem says this adds £12 to an average monthly bill.
Ofgem has also announced that energy prices are going up in 2025, with January’s cap increasing by £21 to £1,738.
Beyond January, Cornwall Insight, the independent energy analyst, is currently predicting that the price cap will drop slightly in April 2025. However, the wholesale energy market remains volatile and Cornwall Insight says energy prices in 2025 are still set to remain above normal levels we’ve seen in the past.
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Why are energy prices so high?
Our energy bills are higher than before the coronavirus pandemic because wholesale gas prices – the amount energy suppliers pay for gas – have skyrocketed.
The coronavirus lockdowns, cold winters, and geopolitical issues, such as Russia’s invasion of Ukraine in early 2022 and the continuing conflict in the Middle East, are just some of the factors that have driven up the cost of energy.
When wholesale gas prices increase, suppliers have to pay more for energy.
Suppliers pass on these higher costs to households by increasing how much they pay for the energy they use, but the Ofgem energy price cap limits how much they can pass on.
While wholesale energy prices largely dropped throughout 2023, they were still higher compared to previous years. When the price cap goes up, as it did in October 2024 and it will in January 2025, it usually reflects continuing volatility in gas prices.
Ofgem has said that we shouldn’t expect energy prices to go down to pre-2022 levels and that volatile gas prices are likely to be a long-term problem.
When does the energy price cap change?
The energy regulator Ofgem sets the energy price cap. It aims to ensure that customers are charged a fair price for their energy. It is reviewed every three months and any changes come into force in January, April, July and October.
The cap is the maximum suppliers can charge households for each unit of gas and electricity used. It only applies to variable and prepayment tariffs, not fixed-rate tariffs.
From 1 October to 31 December, the price cap for a typical household paying by direct debit is £1,717. Your actual bill will vary depending on how much energy you use, where you live and how you pay for your energy.
From 1 January to 31 March 2025, the cap will increase to £1,738, a 1.2% increase from October’s cap.
This cap only applies to England, Wales and Scotland. In Northern Ireland, the energy market works differently and there is no equivalent price cap.
Be aware that the price cap is not the maximum you can pay for your energy. It limits the cost of each unit of gas or electricity you use, not your total bill.
Since January 2024, Ofgem has calculated the price cap using revised typical energy usage values. These have changed from 2,900 kWh to 2,700 kWh for electricity and 12,000 kWh to 11,500 kWh for gas.
One reason for this change could be that households have become more energy efficient. But it also reflects that many households have been limiting energy usage, in an attempt to combat rising prices.
What is the cap if I’m on a prepayment tariff?
The price cap for prepayment customers is £1,669 from October to December, which has risen from £1,522 for July to September.
In January 2025 the prepayment cap will increase to £1,690.
Ofgem has ensured that prepayment customers who get their gas and electricity from the same supplier will continue to pay less than direct debit customers. Standing charges have been reduced for prepayment customers to achieve this saving them around £49 a year, while direct debit customers will pay £10 more a year.
Are energy prices going down?
Energy prices are going up slightly in January 2025, with the cap increasing by £21 from £1,717 to £1,738 for typical customers paying by direct debit.
Cornwall Insight, the independent energy analyst, isn’t currently predicting that the cap will go down significantly in 2025. For April 2025, it predicts the cap could fall to £1,713, which is only a £4 decrease from the current level. It says it will then dip again “slightly” in July 2025.
The reason for these consistently high energy prices is a volatile wholesale energy market that’s sensitive to international shocks, such as supply problems and political events, according to Cornwall Insight.
While Ofgem can reduce the price cap when wholesale gas prices fall, increases in the cap reflect those higher wholesale prices. Cornwall Insight says its latest forecast remains subject to the volatile energy market.
Should I fix my energy?
With the price cap falling over the last 12 months, more suppliers have started offering fixed-rate tariffs for both new and existing customers.
Fixing may be worth considering if you find a deal that beats the price cap and if you prefer to know exactly what you will pay for your energy each month. Ofgem is encouraging customers to “shop around” to find a deal that works for them, claiming that some customers could save £140 on the upcoming cap level.
Ofgem says that you should look at how you currently pay your energy, because moving to a different method of payment could save you money – for example from standard credit to direct debit.
If you’re thinking about fixing, you can compare tariffs and get a personalised quote based on the energy that you use. Make sure you check the terms of the tariff and any exit fees that may apply.
Fixing does come with caveats. Not every tariff or deal will be available to new customers, meaning you may have to be with the supplier already or switch to them first to fix your prices.
Fixing could include additional fees or requirements, such as taking out an extra service with the provider or managing your account online.
With fixed tariffs typically lasting 12 months, you need to think about how prices might move over the entire year – because the wholesale energy market remains volatile, there’s no easy answer. Cornwall Insight, the independent energy analyst, is currently predicting that the price cap will remain at around the current October level in April 2025.
If you’re already locked into a fixed deal that’s more expensive than the price cap, it may be worth seeing if you can switch to a cheaper variable tariff or a cheaper fixed deal. But, if you do decide to leave your current fix, check if you need to pay any penalty fees.
Sam Bromley, Lead Writer and Personal Finance Expert at NerdWallet
What Our Nerds Say
“When deciding whether to go for a fixed deal consider how comfortable you are with the fact that the cap could fall as well as rise. If this happens, you may be locked into paying more for your energy than if you had stayed on a variable tariff, or waited for a more competitive fixed-rate tariff. And depending on the tariff, savings may be slim.”
» MORE: Types of energy tariffs explained
Partner SpotlightNerdWallet has partnered with Love Energy Savings to provide you with the latest business energy deals from leading UK providers, including:
What if I can’t afford my energy bills?
While inflation has slowed, the energy price cap is still higher than it was before the coronavirus pandemic.
With the finances of many families stretched to their limits by the cost of living, some may have struggled to build an emergency fund to help them weather financial shocks.
If you’re able to, cutting down on your energy use could help you to save some money on your bills. But it’s possible that cutting down isn’t an option. If you’re finding it difficult to pay your energy bills then you should ask for help as soon as possible.
You can contact your energy supplier to say you are struggling to afford your bills, and you may be able to arrange a new payment plan. If you can’t come to an agreement and you pay for your energy by direct debit, your supplier may want to switch you to a prepayment tariff.
Some energy suppliers offer grants and hardship funds, as well as advice, so it’s worth seeing if you are eligible for any support from your provider.
While closed at the moment, there are government schemes available that support those in need throughout the winter, including:
- Warm Home Discount
- Winter Fuel Payment
- Cold Weather Payment
There may be some local grants available too, so check with your local council to see if it can offer any support.
» MORE: Help if you can’t afford your energy bills
If you are struggling with your finances and debts, you can also contact charities for help and advice, such as:
» MORE: How debt charities can help
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