Energy bills rise again as new Ofgem price cap announced - what it means for your money

Energy bills will rise again for millions of households from this spring after Ofgem announced its new price cap.

The price cap is rising by 6.4% - although the exact amount you pay depends on how much gas and electricity you use. The typical household paying by direct debit will see their annual energy bill increase from £1,738 a year to £1,849 from April 1 - a rise of £111.

It marks the third increase in energy bills in recent months, after the price cap went up by 10% in October, followed by another 1.2% rise in January. Ofgem updates its price cap every three months, so the new rates will remain in place until June 30, when it will then be revised again.

The price cap for someone paying by pre-payment meter is rising from £1,690 a year to £1,803, and the yearly charge for someone who pays on receipt of bill is rising from £1,851 to £1,969. Ofgem blamed the increase on a spike in wholesale prices, along with an increase in policy costs and inflationary pressures.

Jonathan Brearley, CEO of Ofgem, said: “We know that no price rise is ever welcome, and that the cost of energy remains a huge challenge for many households. But our reliance on international gas markets leads to volatile wholesale prices, and continues to drive up bills, which is why it’s more important than ever that we’re driving forward investment in a cleaner, homegrown system.

“Energy debts that began during the energy crisis have reached record levels and without intervention will continue to grow. This puts families under huge stress and increases costs for all customers. We’re developing plans that could give households with unmanageable debt the clean slate they need to move forward.”

What is the Ofgem price cap?

Despite what its name suggests, the Ofgem price cap does not put a limit on how much you can pay for energy - instead, it sets the maximum unit price you can be charged for gas and electricity, as well as the maximum daily standing charge, which is a fixed fee that you pay to be connected to the grid.

This means your bill is still based on the amount of energy you use, and it can be higher or lower than what we've mentioned above. These headline price cap figures represent what the average billpayer can expect to pay, based on how much energy Ofgem estimates that the average household uses.

Ofgem says the typical home uses 2,700 kwh of electricity and 11,500 kWh of gas over 12 months. There are other factors to take into account. Unit rate prices vary by region, so your location can also effect your bill, and there are different rates for prepayment customers and those who pay on receipt of bill. Confusingly, the energy price cap figure represents a yearly bill, but it is updated every three months so Ofgem can reflect changing wholesale costs.

Who is on the Ofgem price cap?

The Ofgem price cap covers anyone on a standard variable rate (SVR) tariff - so if you're not currently fixed into an energy deal. This could be because you didn't fix into a new deal after your existing tariff expired, or you didn't fix into an energy deal after moving property.

There are 26 million people currently covered by the price cap. You can contact your current energy supplier to see what type of tariff you're on, and to check you're not being charged above the maximum rates allowed under the price cap.

How does Ofgem calculate its price cap?

The largest cost that makes up the price cap is wholesale energy, which is what energy suppliers pay for gas and electricity. The assessment period for wholesale energy prices for the April 2025 price cap was November 18, 2024, to February 17, 2025. There are other elements that are taken into account as well.

Ofgem looks at the cost of maintaining pipes and wires that carry gas and electricity, network and operating costs, as well as VAT, payment method allowances and profits for the energy supplier. Ofgem will announce its July price cap by May 26, 2025.

Why are energy prices rising?

Cornwall Insight said the increase in energy bills is down to colder weather and lower levels of gas storage in Europe, resulting in wholesale prices rising sharply. But they predict energy prices could fall from July onwards, due to talks between Russian and US officials aimed at ending the Ukraine war, before they could rise again in October.