Energy price cap explained
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?
An annual energy bill is currently capped at £1,717 for the average household on a dual-fuel standard variable energy tariff, who pay by direct debit.
This applies between 1 October to 31st December 2024 and represents a 10% rise, adding £149 to the average bill
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 £1,669 (up £147 from the previous cap of £1,522)
Households who pay their bills every three months by cash or cheque will pay £1,829, up from £1,688
However as of 1st January, the cap is due to rise to £1,738. That's an increase of 1.2% and means households will need to find an extra £21 a year
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 will rise again in January with the introduction of a new higher price cap, it has been confirmed, piling pressure on cash-strapped households.
The higher cap, which comes into force on 1st January, marks the second consecutive quarterly hike, and ends a sustained period during the first half of the year when prices seemed to be on a consistent downward trajectory.
The incoming cap will mean the average household with a dual-fuel tariff and that pays by direct debit will face an annual bill of £1,738. This equates to a 1.2% increase from the current cap of £1,717 per year.
Before October's increase, the cap had dropped for consecutive quarters - as energy supply and demand continued to stabilise around the world.
Energy price cap unit rates for 1 October - 31st December
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 October - 31st December) | Previous energy price cap unit rates (1 July - 30 September) | |
|---|---|---|
Electricity | 24.50p per kWh | 22.36p per kWh |
Gas | 6.24p per kWh | 5.48p per kWh |
What does this mean for me?
Industry experts estimate that about 29 million households are affected by the incoming January price cap. That includes four million pre-pay customers.
It's expected that the hike will stretch affordability for the most cash-strapped homes, especially as temperatures drop in the New Year.
Perhaps more controversial than the higher cap, though, is that as of winter 2024, the Winter Fuel Payment will no longer be 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 will be 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 the new energy price cap kicking in on 1st January, many people are bracing for higher 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, EDF is offering a fixed tariff at £1,608, which is a great deal compared to the new rate of £1,738 that comes into force on 1st January.
“We would advise anyone looking to lower their energy costs to secure this tariff or another fixed option before they disappear"
What's the forecast for energy prices in 2025?
The cap is confirmed to rise by January 2025 and it's widely forecast that there'll be another small rise (perhaps 2% or so) in April.
Thereafter, the general consensus seems to be that we could see decreases in the cap in the final two quarters of the year.
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 limited 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.