The UK’s energy regulator, the Office of Gas and Electricity Markets (Ofgem), has announced a 2% increase in the energy price cap for the last quarter of 2025, ending December.
This adjustment will see the average household’s monthly energy bill rise by £2.93 ($3.94), from £100 to £102 for those on default tariffs.
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The modest increase in the price cap is attributed to higher network and policy costs, which ensure a stable and secure power network and support for those in fuel poverty.
The price cap, which limits the maximum rate per unit and standing charge for energy use, is set to affect those not on fixed tariffs.
More than a third of customers (37%) are on fixed tariffs, shielding them from the increase.
Ofgem encourages consumers to explore fixed tariff options, which could offer savings above the new price cap. For some, switching to a fixed tariff could result in more than £200 in annual savings compared to the adjusted cap.
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By GlobalDataThe energy regulator has stated that payment method changes, such as switching from standard credit to direct debit, could also yield savings. With this change, approximately eight million customers paying by standard credit could save £135.60 annually.
Ofgem Markets director general Tim Jarvis stated: “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.”
Ofgem has implemented rules to assist those struggling with energy bills, including tailored repayment plans and emergency credit to prevent disconnection.
When considering inflation, the cap represents a 0.9% decrease from the same period in 2024.
Households paying by direct debit for gas and electricity will see an annual bill of £1,755, which is £625 (26.3%) less than the peak of the energy crisis at the start of 2023, following the government’s energy price guarantee.
Ofgem’s earlier provisional approval of £24bn in system upgrades aims to mitigate network and policy costs in the future.
Jarvis added: “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.”
For the April to June 2025 quarter, the regulator announced a 6.4% increase in the energy price cap, which raised the average annual household energy bill to £1,849.
