Household energy bills are set to fall by around seven per cent from July, after industry regulator Ofgem today unveiled its latest energy price cap. Once the new limits kick in, the typical annual dual-fuel bill for a household paying by direct debit will drop from £1,849 to £1,720—a saving of approximately £129.
Although this represents a welcome respite for many, bills remain £152 (10 per cent) higher than at the same time last year. Moreover, today’s cap is still £660 (28 per cent) lower than the peak level of £2,380 seen in early 2023, when the Government’s energy price guarantee was first introduced at the height of the cost-of-living crisis.
What is the energy price cap?
The energy price cap is a regulatory mechanism designed to protect consumers on default tariffs—those who do not switch to a fixed-rate deal—from facing exorbitant unit prices for gas and electricity. Ofgem reviews and resets the cap twice a year, in April and October, based on wholesale energy costs, network charges, renewables obligations and supplier operating costs. The cap is expressed as an annual bill for a “medium” energy user (12,000 kWh of gas and 2,900 kWh of electricity), paying by direct debit.
Current and forthcoming cap levels
- 1 April–30 June 2025: £1,849 (dual fuel, direct debit)
- 1 July–30 September 2025: £1,720 (dual fuel, direct debit)
For customers on prepayment meters or paying by cash/cheque/quarterly invoice, the cap will fall from £1,969 now to £1,855 from July. These figures include both unit rates and standing charges, which cover the daily cost of delivering energy to homes.
Why does the cap exist?
Introduced on 1 January 2019, the cap was created in response to concerns that millions of households remaining on standard variable tariffs were being charged disproportionately high prices, simply for not switching. While Ofgem and industry alike still encourage proactive switching—often to cheaper, fixed-rate deals—the cap ensures a safety net: suppliers cannot charge more than the cap’s ceiling, even if wholesale costs soar.
Ofgem estimates that the cap saves protected customers between £75 and £100 per year on average, relative to the higher prices they might otherwise face. It applies automatically, with no action required from consumers, and safeguards around 11 million households on standard tariffs and 4 million on prepayment meters.
How is the cap calculated?
Ofgem uses benchmark consumption figures (Typical Domestic Consumption Values) to model a representative bill. It then applies the capped unit prices for gas and electricity, alongside standing charges, to these usage levels. The calculations also account for regional variations in network costs and distinguish between payment methods (e.g., direct debit versus prepayment). Ofgem publishes the detailed breakdown of each cap in February and August—about six weeks before the changes take effect.
Who is affected and who is not?
- Protected by the cap: Customers on standard variable rates, default tariffs and prepayment meters.
- Not affected: Those on fixed-rate deals, which already lock in unit prices for their agreed term, typically one to three years. Certain renewable energy tariffs are also exempt, as they fund specific green initiatives and can carry premium prices by design.
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Will I still need to switch?
Yes. The cap limits how high prices can go, but many suppliers offer fixed-rate deals well below the cap to attract new customers. Ofgem itself notes that customers could save around £200 per year by comparing the market and switching to a lower-cost fixed tariff. Even with July’s cap reduction, households are advised to shop around annually. Switching is straightforward—taking roughly three weeks—and comes with a guarantee of no supply interruptions or exit fees.
What’s next for energy regulation?
Ofgem regards the price cap as a temporary measure to stabilise the market while it implements longer-term reforms. These include faster switching systems, mandatory rollout of smart meters (which send automatic readings), and measures to foster greater competition. The cap will remain in place at least until April 2026, by which time these reforms should deliver a more resilient and consumer-friendly energy market.
For now, households can look forward to a slightly lighter energy bill from July—but the best way to secure lasting savings remains to compare and switch to the cheapest available tariff.
