Ofgem has announced an increase in its price cap to £1,862 per year for a typical dual-fuel household, representing a rise of £221 or 13% compared to current levels. This change, effective from July 1, will add approximately £18 per month to the average household's energy bill.
What is the energy price cap?
The energy price cap sets a maximum price that suppliers can charge customers in England, Scotland and Wales for each unit of gas and electricity used. It also limits the daily standing charge, which is the cost of having your home connected to the grid. The headline figure provided by Ofgem indicates what a typical household using gas and electricity and paying by direct debit can expect to pay. However, it does not cap total bills, as households pay for the energy they actually consume. Energy is regulated separately in Northern Ireland.
What is changing from July?
The price cap taking effect from July 1 will rise by 13% for the three-month period to September 30. Electricity bills will increase by around 5%, while gas bills are set to rise by 24%. Ofgem attributes this increase to higher wholesale gas prices, driven by the ongoing conflict in the Middle East.
Government pledges and their impact
The previous price cap, effective from April 1 to June 30, was the first to reflect Chancellor Rachel Reeves' promise to cut £150 from the average household bill. This was achieved by shifting 75% of Renewables Obligation costs from household bills to general taxation and scrapping the Energy Company Obligation scheme. However, the latest increase effectively cancels out this reduction.
Will prices continue to rise?
Early predictions suggest further increases. Analysts Cornwall Insight forecast the cap for October to December at £1,899 per year, a 2% rise on July's cap, coinciding with higher energy usage in colder months. While the October figure will not be confirmed until August, the outlook remains uncertain due to volatile wholesale market conditions.
What should households do?
Currently, 40% of household energy accounts (22 million) are on fixed tariffs and are unaffected by this rise. Those who have not yet switched to a fixed deal are advised to consider doing so as soon as possible.
How to start switching
Which? recommends looking for deals through price comparison websites that are cheaper than the price cap, with a term of no longer than 12 months and without significant exit fees. Uswitch notes that households can currently lock in a rate that undercuts the July cap by around £250 for the average home, warning that those on standard tariffs will see their bills rise unless they act.
Other ways to save on energy bills
Households can also explore other savings opportunities, such as checking if their energy supplier offers free electricity schemes like British Gas's PeakSave or E.on's Pledge tariff. Adjusting boiler flow settings, using an air fryer instead of an oven, turning down the thermostat, running appliances during off-peak hours, and switching off standby devices can all reduce consumption. Additionally, avoiding estimated bills by providing regular meter readings helps ensure accurate direct debits.
