The energy price cap, regulated by Ofgem, sets the maximum amount suppliers can charge for each unit of energy. It’s updated quarterly to reflect changes in energy costs and inflation. From January 1 to March 31, 2025, the price cap will rise to £1,738, which will increase the average annual energy bill by 1.2%, or £21.

What Does This Mean for You?

The increase in the energy price cap applies to what Ofgem defines as a “typical” household, generally a 2-3 bedroom home with 2-3 occupants. However, the amount you pay will depend on several factors, including your energy usage, location, and payment method.

If you’re on a fixed tariff, your energy bills will not be affected. The price cap only applies to default or standard variable tariffs, which include those paying by direct debit, prepayment meters, standard credit, or Economy 7 meters. For households using prepayment meters, discounts are now applied to the standing charge rather than the unit rate.

For those paying by direct debit, energy bills are often estimated based on usage. To ensure your payments are accurate, it’s a good idea to submit a meter reading and review your bills with your energy supplier.

Changes by Payment Type

From January to March 2025, the energy price cap will result in slight increases for all payment types. Customers paying by direct debit will see their average annual bill increase by £21, or 1.2%. Prepayment customers will experience a similar increase of £21, which is a 1.3% rise. Those on standard credit tariffs will pay around £22 more, an increase of 1.2%, while Economy 7 customers will see a rise of £19, or 1.7%. These changes reflect adjustments in energy costs and inflation, as calculated by Ofgem.

How Energy Efficiency Impacts Bills

Homes with higher energy efficiency ratings will see smaller increases in their bills. For example, a home with an A-rated energy efficiency certificate (EPC) will experience an average increase of £7 annually, while a G-rated home could see an increase of up to £77. The average D-rated home, which is the most common rating in the UK, is likely to see a rise of approximately £31.

Properties with fewer rooms or lower energy consumption will also face smaller increases. For example, one-bedroom flats with an A-rated EPC may pay £7 more, while larger homes with lower efficiency ratings, such as five-bedroom G-rated properties, could face increases of up to £126 annually.

Understanding Energy Usage

Your energy costs depend on factors like the size of your home, the number of residents, and your energy efficiency. Smaller households, such as those in one-bedroom flats, are considered low energy users, typically consuming around 8,000 kWh of gas and 1,800 kWh of electricity annually. Medium-use households, such as those in two- or three-bedroom homes, average 12,000 kWh of gas and 2,900 kWh of electricity. Larger households, like those in four-bedroom homes with four or more residents, consume around 17,000 kWh of gas and 4,300 kWh of electricity annually.

What About Standing Charges?

The standing charge is a fixed daily fee for maintaining your energy connection, regardless of how much energy you use. It also covers costs like supply network maintenance and government environmental schemes. For the January to March 2025 period, standing charges will remain similar to those in late 2024—approximately 61p per day for electricity and 31p per day for gas. Ofgem has been reviewing standing charges, and policy changes may be announced later this year.

How Can You Save on Energy Costs?

Although energy prices remain high, there are steps you can take to manage your bills. Switching to a new supplier or checking for better deals with your current provider might help reduce costs. Regularly submitting meter readings can ensure your bills accurately reflect your usage, and improving your home’s energy efficiency—such as upgrading insulation or using energy-saving appliances—can lead to long-term savings.

For more insights, visit Ofgem’s website or consult their latest energy price cap reports to understand how these changes may affect your household.