Energy price cap reforms could see bills rise in April

New forecasts from Cornwall Insight have seen price cap predictions rise to £1,762  a year for a typical dual fuel consumer. This would represent a 1% increase from January’s price cap of £1,738 announced in November.

Cornwall Insight says that the increase in the cap forecast largely reflects the movement in the wholesale market, where economic and geopolitical factors affecting the global market have raised predictions for household bills. The continued uncertainty regarding the future of the Russia-Ukraine conflict and its implications for gas supplies to Europe is now occurring against the backdrop of an impending second Donald Trump presidency and its impact on gas exports from America – in addition to question marks over effects on economic growth in general.

Cornwall Insight also says it has also seen new information published on energy network charges and other non-wholesale costs, which is compounding the increase in the underlying costs of electricity and gas – all of which has caused the increase in forecast predictions. In addition, there is also the prospect of reforms adding extra costs to the cap, which would represent at least another £20 on annual bills.

These potential reforms, which could take effect from April, include incorporating allowances to fund the Energy-Intensive Industry (EIIs) network charge exemption scheme – the scheme introduced through government legislation – which will compensate EIIs for a portion of their network charging costs. There is also a potential extension by Ofgem of the existing Supplier Bad Debt Allowance, which was introduced last year to cover additional support credit for some prepayment meter customers.

Factoring in the proposed reforms, forecasts show the cap could rise to around £1,782, which would represent a 2.5% increase from January.

Looking further ahead, current forecasts suggest a drop in energy prices this July. However, what is unknown is the long-term impact of the recently announced extensions of nuclear plants – Torness in East Lothian and Heysham 2 in Lancashire to 2030, along with Hartlepool and Heysham 1 to 2027 – on wholesale prices, and therefore household bills.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said “Energy bills in 2025 are shaping up to reflect a perfect storm of regulatory changes and market turbulence, in addition to any broader sector reforms put forward by the new Government. While the wholesale market will remain a key driver of prices, Ofgem’s reforms and the introduction of new charges could raise costs further for households. There are a lot of unknowns, and while significant rises in price are currently unlikely, the scale of any increases will depend on how the market and the reforms unfold.

“What we do know is that the market is unlikely to lower bills, and affordability and fuel poverty will continue to be a pressing issue. This underscores the need for policymakers and suppliers to prioritise supporting vulnerable consumers. This could involve looking at short-term financial assistance, while simultaneously, focusing on longer-term solutions, such as reforming energy tariffs, accelerating energy efficiency programs, and investing in sustainable energy.”

Ben Gallizzi, Energy Expert at Uswitch.com, said “This predicted rise in April’s price cap would mark a third consecutive hike for energy prices, adding to the current pain for households.

“This increase could mean the average household on a standard variable tariff would pay 1% more on their rates from April – on top of the 1% increase in January that we’re yet to pay.

“This is an early prediction so this 1% rise isn’t guaranteed, but energy prices remain uncertain.

“There are now a range of fixed deals available that are significantly cheaper than the predicted price cap for January, so it is well worth running a comparison to see how much you could save. Right now, the average household could save up to £112 per year against the current price cap by switching to a twelve month fixed deal.”