The UK’s energy regulator Ofgem has announced that the energy price cap will increase by 1.2% for the period between January and March 2025.
The energy price cap establishes the maximum rate that energy suppliers can charge customers for the standing charge and unit cost of electricity and gas supplies. For the average household on a dual fuel tariff and paying by direct debit, their annual energy cost is now capped at around £1,738 per year.
While the 1.2% rise is unwelcome news for UK households, it is worth noting that this cap is 10% lower than the same period of this year, which sat at £1,928, and around 57.2% lower than the peak of the energy crisis in January – March 2023, where the cap sat at £2,321 for the average household.
Ofgem notes that increasing numbers of customers are choosing to switch energy tariffs or suppliers in response to both rising costs and increasing market choice. Around 1.5 million households switched tariffs in the past three months alone, and the regulator is encouraging consumers to explore their options to get the best deal.
Tim Jarvis, director general of markets at Ofgem, said: “While today’s change means the cap has remained relatively stable, 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.
“Our reliance on volatile international markets means the cost of energy will continue to fluctuate. So it’s more important than ever to stay focused on building a renewable, home-grown energy system to bring costs down and give households stability.”
Worrying news for consumers
In response to the news that bills will once again be rising for UK households, the energy industry has called for more investment into clean energy.
Trade association Energy UK’s chief executive Dhara Vyas said: “Another increase in the price cap will be unwelcome news for customers, many of whom are already struggling to afford their bills – which is shown by the current record amount of debt.
“The way to keep bills down and reduce our dependence on a volatile wholesale market is to continue developing our own sources of domestic clean energy while also making more of our homes and businesses energy efficient.”
Caroline Simpson, spokesperson for anti-fuel poverty campaign group Warm This Winter, agreed, adding: “We desperately need to get on with the job of ramping up our supply of homegrown, renewable energy, which is abundantly available to us on this windy island and a properly funded programme of insulation and ventilation to upgrade our leaky homes.
“Homegrown renewables are the only way we will cut our bills for good, but whilst that kicks in, we also need commitment from the government that vulnerable households will be supported with their energy bills this winter and next with a social tariff funded by the energy sector’s vast profits.”
Sam Richards, CEO of pro-growth campaign group Britain Remade, commented: “To bring down energy prices, we must get as many wind farms, solar projects and new nuclear power stations connected to the grid as quickly as possible, but this can only be achieved if the government slashes the time it takes to build economy boosting infrastructure. Keir Starmer and his ministers have made progress, but they must move much faster.
“We must also move away from the ‘one size fits all’ approach to how energy is priced. Local pricing not only means those who live close to where energy is produced benefit from cheaper electricity, bills would be cut across the country.”
Hope on the horizon
Despite this news, analysis suggests that bills could dip again in the spring. Energy consultancy Cornwall Insight has forecast that the price cap will fall by 1.4% in April 2025, to £1,713 for a typical dual fuel, direct debit household, with another drop in prices expected in July.
Dr Craig Lowrey, principal consultant at Cornwall Insight, commented: “This latest increase in the price cap underlines the continuing volatility of the energy market, which is still experiencing the lingering effects of the energy crisis. While the forecasted reductions from April offer some hope, they remain well above historical norms and do little to alleviate the immediate pressure on consumers this winter.”
