Ofgem has announced that the next energy price cap will rise to £1,738 for the period from 1st January to 31st March 2025. This adjustment reflects a moderate increase as a response to the changing energy market dynamics.
This is detailed further by changes in the unit prices and standing charges for both electricity and gas:
Since January 2023, Ofgem has been reviewing the price cap quarterly to better adapt to market conditions, ensuring that prices are fair and reflect the actual cost of energy. The upcoming review dates are scheduled for:
These changes affect approximately 29 million UK households, with substantial impacts due to the volatile nature of global energy markets and the potential for a colder-than-average winter, which could drive even higher energy demands.
"With energy prices rising by 10% from 1st October 2024, and a further 1% from 1st January 2025, we are strongly urging customers to be proactive and join the thousands of UK consumers who are locking in their energy prices by switching to a fixed rate energy tariff. In doing so, customers can reduce their energy bills by approximately £188 or 10.8%."
- Scott Byrom, Chief Executive Officer
The 'Energy Price Cap' is a legal requirement that energy suppliers must comply with in an attempt by Ofgem, the energy regulator, to protect households against unfair rises in gas and electricity costs and being overcharged for their home gas and electricity. The cap puts a limit in place on what suppliers can charge customers who are on either standard variable or default energy tariffs.
It is these tariffs that around 29 million of the UK remain on and are, in any normal time, amongst the most expensive forms of energy tariff with savings now available of around £160 below the new price cap level.
Price caps work by setting a limit on the rates a supplier can charge for each unit of gas and electricity. Many households are stuck on expensive default tariffs that they have fallen into after a fixed rate energy deal has expired, when they move in to a new property or if they have never switched their gas and electricity provider. With the cap in place, suppliers can only charge up to a set amount for their default energy tariffs, therefore apparently (as Ofgem claims) saving households money on their energy bills.
Your tariff details are on your energy bill. You can see if you are on a "Standard Variable" tariff or, if you switched to an energy supplier after another supplier went bust, a "Deemed Contract." If you are on a fixed-rate energy tariff, the cap will not apply to you until your energy tariff expires.
Even with the cap in place, this doesn't mean you won't end up paying more for your energy each year. Price caps are set at a unit price (the amount you pay for each kilowatt hour used) plus standing charges (the amount charged each day whether you use energy or not). With the cap being set by averaging out annual energy usage, if you use more energy than the medium Typical Domestic Consumption Values (TDCVs) - meaning "the average household", you will still be charged extra. Equally, if you use less, then your annual energy bill will be lower.
Price caps are also based on your region due to transportation costs and you could see higher rates if you don't pay by direct debit.
Usually, with the cap in place for standard variable or default tariffs, the best way to make big savings to your energy bills is to switch to a cheaper, more often "fixed", energy tariff. This could be with your existing energy supplier or moving to a new one altogether. As the price cap doesn't protect you from price fluctuations, it's generally best to consider a fixed rate plan to lock in your energy costs for a set period of time, e.g. 12-24 months.
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