Energy price cap explained: what is the energy price cap?
Find out what the latest price cap means for your energy bills and what you can do about it.
REMEMBER: The price cap is based on the maximum a supplier can charge if you are an ‘average user’, so if you use more, you pay more...
What's the latest price cap and what does it mean for me?
The average annual energy bill currently stands at £1,738 for the average household that's on a dual-fuel standard variable tariff, and that pays by direct debit. This applies between 1st January and 31st March 2025 and represents a 1.2% rise, adding £21 to the average bill from the last cap
Average annual bills for pre-pay customers, defined as those who don't pay for their energy by direct debit and use pre-pay meters, stand at £1,690. That's a rise of 1.3%, or £21. if you pay on receipt of a quarterly bill, you'll pay £1,851 per year - up from £1,829 previously
Bills are about 50% higher than before COVID sent prices spiralling in 2020
Energy bills are due to rise again in April, with the average yearly bill confirmed to be soaring to £1,849 for customers on dual-fuel variable tariffs who pay by direct debit. That represents a rise of 6.4%, adding £111 to the average household's bill
Changes in the market mean we’re now able to offer better energy deals through our switching service, which could save you money or let you sign up to fixed rate energy tariff to insulate you from any further price rises
Energy bills are due to rise again with the introduction of a higher price cap in April, piling pressure on cash-strapped households.
Under the current cap, which is in force between 1st January and 31st March, the average household with a dual-fuel tariff and that pays by direct debit faces an annual bill of £1,738. This equates to a 1.2% increase from the previous cap of £1,717 per year.
The bad news is that from 1st April we're due a third consecutive hike in the price cap, it has been confirmed. This will bring the average bill for customers on a dual-fuel tariffs and who pay by direct debit to a £1,849.
The 6.4% increase is much larger than the rise of 2-3% that industry-watchers expected.
Energy price cap unit rates for 1 January - 31st March
Under the terms of the cap, you pay a set rate for each unit of energy you use. Here's how the current unit rates look:
Current energy price cap unit rates (1 January - 31st March) | Incoming energy price cap unit rates (1 April to 30 June 2025) | |
|---|---|---|
Electricity | 24.86p per kWh 60.97p per day standing charge | 27.03p per kWh 53.80p per day standing charge |
Gas | 6.34p per KWh 31.65p per day standing charge | 6.99p per kWh 32.67p per day standing charge |
What does this mean for me?
Industry experts estimate that about 29 million households are affected by the current price cap and the looming rise in April. That includes four million pre-pay customers.
It's expected that the hikes will stretch affordability for the most cash-strapped homes. But perhaps more controversial than the higher cap, though, is that the Winter Fuel Payment is no longer paid to all pensioners in England and Wales.
Under Labour Chancellor Rachel Reeves' package of reforms, only pensioners who get pension credit or other means-tested benefits are eligible.
Intended to help pensioners heat their homes, the Winter Fuel Payment is typically worth between £100-£300, depending on the pensioner's circumstances.
Home Services and Mortgages Expert
Our expert says
“With a higher cap due to come into force in April, many people are bracing for skyrocketing energy bills. To help manage these rising costs, we recommend looking into fixed-rate tariffs.
“By locking in a fixed rate, you can shield yourself from future price hikes and have a clear idea of what your energy costs will be. In these uncertain times, fixing your rate can offer peace of mind and make budgeting easier.
“For example, right now on MoneySuperMarket, E.ON is offering a fixed tariff at £1,649, which is a great deal compared to the current rate of £1,738 that came into force on 1st January. And it looks even better value, given the news that energy bills will rise again in April.
“We would advise anyone looking to lower their energy costs to secure one of our money-saving tariffs or another fixed option before they disappear"
What's the forecast for energy prices in 2025?
With April's price cap rise now confirmed to be larger than initially forecast, the consensus appears to be that there'll be a small reduction in July - most likely around 2%.
However, any respite it affords billpayers is likely to be temporary and short-lived, with October expected to bring another modest rise of around 1%.
Energy price cap history - Jan 2019 to Jan 2025
Should I switch energy suppliers right now?
In normal circumstances, switching has been the best way to save money on energy bills. But as the world lurched from crisis to crisis and energy prices soared in recent years, latterly that’s not been the case.
That’s because suppliers responded to sky-high wholesale energy prices by withdrawing tariffs for new customers, while those available for existing customers were likely to be even higher than you’re paying on your current STV.
In turn, MoneySuperMarket and other price comparison sites were forced to suspend switching because we could no longer save our customers money.
With clear signs that conditions in the energy market are improving at last, we’re now able to offer a switching service that may be able to save you money or allow you get the peace of mind knowing you’re insulated by a fixed rate.
Why was the cap introduced?
The price cap was intended as a safety net for customers who do not regularly switch and who are on standard or default tariffs – typically a supplier’s most costly tariff.
The aim of the cap was to make sure customers who didn’t switch still got a ‘fair price’.
Despite this, variable tariffs set at the price cap level were usually some of the most expensive deals.
What if my energy supplier goes bust?
If your provider does collapse, there’s no need to panic, as Ofgem steps in to protect customers.
The regulator carries out a process of choosing a new supplier to ‘rescue’ the business.
You can be reassured that your energy supply will continue as normal, and any credit balances will be protected.
What if I’m struggling to pay my bills?
Crucially, if you’re struggling to afford heating costs, you should contact your energy supplier as soon as possible.
Some providers also allow you to reduce your outgoings by taking advantage of the Demand Flexibility Service.
This offers cheaper energy if you reduce your usage at designated times of day, during certain months. You can check if your supplier is signed up to the Demand Flexibility Service, or is planning to participate in future, by giving them a ring.
You may be eligible for extra help too. This will depend on your circumstances but could include:
Debt repayment plans
Payment breaks
Emergency credit for those on prepayment meters
Schemes such as the Winter Fuel Payment or the £140 Warm Home Discount
Read more here: Where to turn for help with your energy bills
Take steps to reduce your bills
Now is also a good time to take steps around your home to be more energy efficient ahead of increased energy usage during the winter months.
Simple things you can do include switching gadgets off standby, making the move to energy-saving light bulbs, and only boiling the amount of water you need in the kettle.
Need some more pointers? Read our simple tips for being more energy efficient.
Is there an energy price cap for business energy?
No, the energy price cap only affects domestic energy tariffs.
Instead, the government introduced the Energy Bills Discount Scheme, or 'EBDS'. This offered discounted energy rates on eligible non-domestic energy contracts for 12 months from April 1, 2023 until March 31, 2024.
No new schemes have been announced, so comparing and switching your business energy supplier remains the primary way you can take steps to reduce your energy bills.
Sources and methodology
All price cap data and volume of UK households on a standard tariff provided by Ofgem.