Energy price cap to rise by 1.2% from January

Energy regulator Ofgem has announced a 1.2% increase of the energy price cap for the period covering January-March 2025.

The change to the price cap – which sets a maximum rate per unit and standing charge that can be billed to customers for their energy use – will rise by £21 for an average household per year or around £1.75 a month.

For an average household paying by Direct Debit for dual fuel this equates to £1,738 per year. This is 10% (£190) cheaper compared to January-March 2024 (£1,928) and 57.2% (£2,321) less than the energy crisis (January-March 2023).

It comes as analysis by Ofgem shows around 1.5million households switched tariff over the past three months. The regulator is urging customers to take advantage of the rising choice in the market and look for the best deal to help keep their household bills down. By switching, savings of up to £140 are currently available.

Following a call by Ofgem in August for suppliers to offer more choice with low and no-standing charge tariffs, there has been an increase in the number of suppliers offering these kinds of deals. There are currently 8 available that are at least 10% below the level set in the price cap.

However, while these come with a lower standing charge, they do have a higher unit rate. They could benefit customers with lower energy usage but will not work for everyone so consumers should carefully consider what works for them.

Tim Jarvis, Director General of Markets at Ofgem, said “While today’s change means the cap has remained relatively stable, we understand that the cost of energy remains a challenge for too many households. However, with more tariffs coming into the market, there are ways for customers to bring their bill down so please shop around and look at all the options.

“Our reliance on volatile international markets – which are affected by factors such as events in Russia and the Middle East – means the cost of energy will continue to fluctuate. So it’s more important than ever to stay focused on building a renewable, home-grown energy system to bring costs down and give households stability.

“In the short term though, anyone struggling with bills should speak to their supplier to make sure they’re getting the help they need and look around to make sure they’re on the best, most affordable deal for them.”

Reacting to the announcement, Chief Client Officer at StepChange Debt Charity, Richard Lane, said “News out today that the typical cost of energy bills will rise in the new year is a blow to consumers who are already facing considerable cost of living pressures. What’s more, this decision comes as inflation trended above the Bank of England’s 2% target this week, driven by rising energy bills.”

“The cyclical nature of energy usage means consumers face generally higher costs over the winter period, and as a result this decision will have a two-pronged impact on consumers. First, it piles on additional financial pressure at an already difficult time, but it also reduces struggling households’ ability to tackle existing energy debt.”

“It’s for this reason that alongside other sector partners we have consistently been calling on the Government to introduce targeted support for energy bills for those who need it most, alongside a Help to Repay scheme for those facing energy debt as a result of high costs over the last three years.”

Independent Age Chief Executive Joanna Elson, CBE said “Today’s price cap announcement will be extremely concerning to older people living in financial hardship. We now know that energy bills will rise yet again in January by 1% from an average of £1,717 to £1,738. Earlier this year, it was predicted that energy bills would start to fall from January 2025, so this will be a hard pill to swallow for those in later life worried that their budgets were already stretched to breaking point. Now they will need to find extra money to cover their rising bills.  

“This bill increase will arrive right in the middle of winter, a period we anticipate will be very tough for millions of older people. That’s because the latest figures show that almost one million eligible older people do not receive Pension Credit, meaning they will no longer qualify for the Winter Fuel Payment despite living on a low income. We are also worried about the older people that live just above the Pension Credit threshold, sometimes by just a few pounds. They will now lose a vital lifeline during a period of increased energy costs.  

“We are running out of time, but it’s not too late for the UK Government to reconsider its plan to means test the Winter Fuel Payment. It’s misguided and will see far too many older people fall through the cracks. If there isn’t a course correction, we are looking at a winter of drastic cutbacks and ill health. The older people we speak to are worried that losing the extra money will negatively impact their physical health, as they will be forced to cut down on their heating and eating.  

“High energy prices have been a part of life for several years now. The UK Government should address this issue and bring in policies that provide long-term financial security for all older people. Introducing a single energy social tariff will help protect those living on low incomes from future spikes in energy costs. Nobody should be left out in the cold.”