Households are bracing for yet another hike in their energy bills after Ofgem’s decision to increase the price cap by 6.4 per cent.
The price cap dictates the maximum rate per unit and standing charge for energy consumption. It will take effect from April 1.
The cap is poised to rise by £111 annually for the average household – about £9.25 per month over the cap's three-month duration.
This cap sets the ceiling for what energy suppliers can charge consumers in England, Scotland, and Wales for each kilowatt hour (kWh) of energy consumed.
Northern Ireland operates under separate energy regulations.
Ofgem’s figures show what price increases households using both gas and electricity and paying via direct debit can anticipate, assuming their energy consumption aligns with the average.
However, the price cap doesn't impose a limit on total bills. Actual costs depend on individual energy usage.
Here is why the price cap is going up and what people can do to save money.
Why is the price cap rising?
Ofgem said a recent spike in wholesale prices was the main driver of the latest price rise, accounting for around 78 per cent of the total increase. A small increase in policy costs and associated inflationary pressures made up a further 22 per cent.
Jonathan Brearley, the chief executive of Ofgem, said our reliance on international gas markets leads to volatile wholesale prices, and continues to drive up bills, “which is why it’s more important than ever that we’re driving forward investment in a cleaner, homegrown system”.
What can I do to lower my bills?
Ofgem’s price cap determines the amount paid by those households on a standard variable tariff, meaning those who have sought out and signed up to a fixed deal – where the unit rates and standing charges are fixed for the length of the contract, usually a year – are immune.
The single most effective way of avoiding increases to the price cap is by taking a little time to investigate fixed deals, and signing up to one.
Since Ofgem’s last price cap announcement in November 2024, four million customers have moved to a fixed tariff. Now, 11 million people are on a fixed deal and won’t be affected by the change in the price cap. This is the largest movement of customers coming off the price cap and on to a fixed deal since the energy crisis.
How do I sign up to a fixed deal?
The first step is to seek out a comparison site, ideally one that lists all suppliers rather than only those who pay the site to advertise their deals. A quick search online will guide with this.
Comparison sites are easy to use and self-explanatory, but it will help to have figures from your current energy supplier on your yearly use of gas and electricity in units. This information should be clearly listed within your energy account with your current supplier.
When comparing deals, remember that the potential savings you’re seeing are compared to the current price cap, so they may not look significant. But remember that the price cap is going up by 6.4 per cent from April 1 – so if you do nothing your price will rise but if you fix it will drop.
What support is available for me?
Ofgem has announced an extension of the debt allowance, which supports suppliers in helping consumers get on top of their bills and stay on supply, reducing the physical and emotional harm that can result from self-disconnection. This comes as debts hit record levels of £3.8 billion.
Ofgem has urged people to make the most of any state benefits they are entitled to, which could help with paying energy bills as well as the wider cost of living.
Around 1.4 million pensioners are already receiving pension credit, but the Government estimates up to 880,000 further households are eligible for the support for those with a low income.
People receiving pension credit qualify for the winter fuel payment worth up to £300, to help with bills.
Previously, anyone over state pension age could receive the payment, but this was changed by the new Government, meaning about 10 million pensioners will miss out this year.
I think I’m going to struggle to pay my bills, what can I do?
People are encouraged to contact their energy supplier if they are worried about paying their bills.
Energy companies are required to work with customers to agree on a payment plan they can afford, which could mean more flexibility over how and at what time people pay.
They should take into account people’s income and outgoings, debts and personal circumstances, and an estimate of how much energy will be used in future, for which regular meter readings can help build a more accurate picture.
