On 1st January 2025, the energy price most households pay for gas and electricity will increase again - this time by around 1% as announced by the energy regulator Ofgem. So what does the future hold and should you consider fixing your energy prices? 

The Energy Price Cap is set by Ofgem and is designed to protect consumers by capping the maximum price that energy suppliers can charge per unit of gas and electricity. This cap is updated every 3 months, and impacts around 28 million households in England, Wales, and Scotland.

Key Points on the Latest Energy Price Cap:

1. New Energy Price Cap Rates

• Effective Dates: 1 January 2025 to 31 March 2025.

• Gas Price Cap: 6.34p per kilowatt hour (kWh) - up 1.6% from 6.24p

• Electricity Price Cap: 24.86p per kWh - up 1.4% from 24.50p

Average standing charges and unit rates if you pay by Direct Debit:

Rates and standing charges are averages, which vary by region. Assumes payments by Direct Debit and includes VAT (at 5%). For those who pay each month after getting a bill, it's 6% higher.

2. Impact on Annual Bills

• Typical Annual Bill: A household paying by direct debit will have an annual bill of £1,738, which is a 1.2% (£21) increase from the previous period (Oct to Dec).

• Cash or Cheque Payments: Households paying every three months by cash or cheque will have a higher annual bill of £1,829 (up £22).

• Prepayment Meters: Households using prepayment meters will see a typical annual bill of £1,690 (up £21).

3. Standing Charges:

• These are largely unchanged but it still means you would pay nearly £1/day even if you didn’t use any electricity or gas.

4. Support for Vulnerable Customers:

All energy suppliers, under Government rules, need to provide support for certain customers such as the elderly, the vulnerable, those with young children and those in fuel poverty. If you think you might qualify for support you should contact your energy supplier.There may also be additional support you qualify for, and more information can be found at Energy UK.

A cap on standing charges and unit rates - not a cap on your bill

It’s important to understand that there is no limit to your total bill—the more energy you use, the more you’ll pay. The caps only apply to the maximum cost per unit of gas or electricity. The estimated costs provided are based on a 'typical household' consuming 11,500 kWh of gas and 2,700 kWh of electricity annually, which is the basis for the average bill mentioned above.

Considerations for Fixed-Price Deals

If you’re on a variable tariff from your energy supplier and subject to the Energy Cap, there may be cheaper alternatives available. Fixed-rate plans are often priced below the current Energy Cap and could help lower your bill. Some of these tariffs also allow free switching if prices drop.

Websites like uSwitch and MoneySavingExpert provide comparison tools to help you explore potential savings by switching suppliers or tariffs. Additionally, contacting your current supplier may reveal better deals tailored to your needs.

Summary

Although the Energy Cap is increasing by just 1%, further increases could be on the horizon. Additionally, some fixed-price deals may be more competitive than the Energy Cap and could save you money over the next 6–9 months - especially if you can switch suppliers without incurring a penalty.

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Remember the content provided in this article is for information purposes only and should not be considered as advice.