Energy Bills to Rise Again in 2025, Impacting Millions.

The Ofgem energy price cap has been officially announced to increase to £1,738 annually starting in January. However, analysts at Cornwall Insight predict that it will rise further to £1,762 in April.

Energy costs are anticipated to increase once more next year, presenting another challenge for millions of households.

The Ofgem energy price cap has already been confirmed to rise to £1,738 annually for the average household utilizing direct debit payments starting in January. However, recent analysis from Cornwall Insight indicates that this figure may escalate further to £1,762 beginning in April. Ofgem revises its energy price cap every three months.

Cornwall Insight attributes its forecast to various “economic and geopolitical factors,” which include the ongoing conflict in Ukraine, the potential re-election of Donald Trump as US President, and uncertainties regarding overall economic growth. It is important to note that these are merely forecasts, and Ofgem will not finalize its April price cap until at least February 25, 2025.

The price cap does not impose a limit on the total amount one can pay for energy. Higher energy consumption results in higher bills, while reduced usage leads to lower costs. The price cap specifically establishes the maximum unit price for gas and electricity, along with the highest daily standing charge.

Dr. Craig Lowrey, the principal consultant at Cornwall Insight, stated: “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.”

Ben Gallizzi, energy expert at Uswitch.com, stated: “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. Consumers who are worried about paying their energy bill should check what energy help they are eligible for and contact their supplier who may be able to offer support.”

The anticipated rise in energy prices, with the Ofgem price cap set to increase in January and potentially again in April, signals further financial strain for households already grappling with high living costs. These escalating bills are likely to deepen the crisis of affordability and fuel poverty, leaving many vulnerable consumers at risk. While government reforms and market conditions remain uncertain, the outlook for 2025 suggests little relief in sight.

Without immediate intervention, millions of families could face even greater economic hardship, highlighting the urgent need for stronger policies to protect consumers from relentless energy price hikes.

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Philippe Commaret, EDF’s managing director for customers, told BBC Radio 4: “We face, despite the support the Government has already announced, a dramatic and catastrophic winter for our customers.”

“In January, half of the UK households might be in fuel poverty.”

Energy poverty is defined as spending over 10% of income on gas and electricity bills.

Commaret is calling on the Government to offer more support to households after the most recent predictions from Cornwall Insight showed that energy bills are on track to top £5,300 per year in April.

On Friday, regulator Ofgem will confirm the price cap for October.

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“Fuel stress”, or “fuel poverty”, is a term used when at least 10% of a household’s budget is spent on energy bills, indicating that energy costs are unaffordable. 

New research by the Resolution Foundation released on Monday suggests that, while fuel stress is currently at 9%, it is expected to jump to 27% due to the energy price cap rising by more than 50% on the back of rising fuel prices. 

In the North East of England and the West Midlands, levels of fuel stress are expected to be the highest at 33% and 32% respectively. Levels of fuel stress in pensioner households are expected to hit 38%, and 35% among those living in local authority housing. 

On 7 February, Ofgem will announce the new price cap level, which is expected to be increased to around £2,000.  

The Resolution Foundation has called on ministers to do more to support lower-income families through the benefits system. Alternatively, the foundation recommended that an additional payment based on the Warm Homes Discount Scheme (WHD) could be pursued.