Energy bills to rise for millions as new Ofgem price cap announced

Energy bills will rise again for millions of households this winter after Ofgem announced its new price cap.

The price cap is going up by 2% from this October. This means for every £100 you spend on gas and electricity, your bill will rise to £102. The hike is bigger than expected, with most analysts predicting a 1% increase in the price cap.

Ofgem says the average dual fuel household paying by direct debit will see their annual energy bill rise from £1,720 to £1,755.

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The price cap for someone paying by pre-payment meter is increasing from £1,672 a year to £1,707, and the yearly charge for someone who pays on receipt of bill is going up from £1,855 a year to £1,890.

But there is no actual cap on how much you can pay for energy. The price cap limits how much you can be charged for unit rates of gas and electricity, as well as the standing charges.

You pay standing charges no matter how much energy you use - they are daily fees for you to be connected to the network. The price cap changes every three months, in January, April, July and October.

The new price cap will come into force on October 1 and will remain in place until December 31, when it will then be updated again by Ofgem.

Ofgem said the larger than expected increase is partly down to due to changes in network costs and also the expansion of the Warm Home Discount scheme, which gives eligible households £150 off their energy bill during winter.

Tim Jarvis, Director General, Markets at Ofgem, said: “While there is still more to do, we are seeing signs of a healthier market. There are more people on fixed tariffs saving themselves money, switching is rising as options for consumers increase, and we’ve seen increases in customer satisfaction, alongside a reduction in complaints.

“While today’s change is below inflation, we know customers might not be feeling it in their pockets. There are things you can do though – consider a fixed tariff as this could save more than £200 against the new cap.

“Paying by direct debit or smart pay as you go could also save you money. In the longer term, we will continue to see fluctuations in our energy prices until we are insulated from volatile international gas markets.

“That’s why we continue to work with government and the sector to diversify our energy mix to reduce the reliance on markets we do not control.”

What is the Ofgem price cap?

The Ofgem price cap sets the maximum you can be charged for unit rates of gas and electricity, plus your standing charges. This means your bill can be higher or lower than the main price cap figure.

This main price cap figure represents what the average billpayer can expect to pay for energy over a year. Ofgem says the typical home uses 2,700 kWh of electricity and 11,500 kWh of gas over 12 months.

Your location can also affect your bill, as unit rates vary by region. There are also different rates for prepayment customers and those who pay on receipt of bill.

It is also worth keeping in mind that even though the price cap represents a yearly bill, it is actually updated every three months to take into account fluctuating wholesale energy prices.

What are the unit rates and standing charges?

The average unit rate for electricity is rising from 25.73p per per kilowatt hour (kWh) to 26.35p per kWh. The standing charge for electricity is going up from 51.37p a day to 53.68p a day.

The average unit rate for gas is falling from 6.33p per kilowatt hour (kWh) to 6.29p per kWh, while the standing charge is rising from 29.82p a day to 34.03p a day.

These are representative of the average direct debit bill across England,Scotland and Wales. There are different unit rates and standing charges for prepayment customers and those who pay on receipt of bills.

Who is on the Ofgem price cap?

You will be covered by the Ofgem price cap if you are on a standard variable rate (SVR) energy tariff - so if you're not currently fixed into an energy deal.

This could be because you didn't fix into a new deal after your existing tariff expired, or you didn't fix into an energy deal after moving property. You can contact your current energy supplier to see what type of tariff you're on.

There are around 34 million people in England, Wales and Scotland that are currently on the price cap. This includes 20 million direct debit customers, eight million prepayment customers and six million who pay on receipt of bill.

There are around 20 million households who are on a fixed energy tariff. Ofgem estimates that shopping around for a fixed tariff has the potential to save some households more than £200 compared to the upcoming price cap level.

How does Ofgem calculate its price cap?

The largest cost that makes up the price cap is wholesale energy, which is what energy suppliers pay for gas and electricity. The assessment period for wholesale energy prices for the April 2025 price cap was May 19, 2025, to August 18, 2025.

There are other elements that are taken into account as well. Ofgem looks at the cost of maintaining pipes and wires that carry gas and electricity, network and operating costs, as well as VAT, payment method allowances and profits for the energy supplier.

Ofgem will announce its January price cap by November 27, 2025.

Will energy prices keep rising?

Cornwall Insight, which has a track record of accurately predicting the next energy price cap, currently expects the energy price cap will fall in January to £1,712 for the typical direct debit household.

However, this is likely to change between now and when the next price cap is announced, and is subject to "geopolitical movement, weather patterns, changes to policy costs and the potential introduction of new policy costs".