UK Energy Price Cap to Increase by Over Six Percent From April

The UK’s Office of Gas and Electricity Markets (Ofgem) announced on Feb. 25 a 6.4 percent increase in the energy price cap for the period April to June 2025. The price cap will increase by £111 for an average household annually. For an average homeowner for dual fuel this amounts to £1,849 per year, up £159 or 9.4 percent compared to this time last year, but remains £531 or 22 percent lower than during the energy crisis at the start of 2023.

The energy price cap was announced by the UK government and has been implemented since January 2019. Ofgem is required to often review the level at which the price cap is set. The agency makes certain that an energy supplier can recover its efficient costs while ensuring consumers pay fair value for their energy usage.

During Ofgem’s last price cap announcement in November 2024, four million customers switched to a fixed tariff. As it stands, 11 million UK households are on a fixed deal and as a result will not be impacted by energy price cap change.

The increase in the energy price cap can be attributed to an increase in wholesale prices and increase in policy costs and associated inflationary pressures. Higher UK gas and power prices on the wholesale market account for around 78 percent of the total energy price cap increase.

UK gas and power prices have been on an upward price trend, in line with below seasonal normal temperatures increasing gas demand for household consumption, and in turn reducing gas stocks in storage sites. Moreover, discussions around gas storage targets in the European market have led to risk premiums in contracts, particularly for the summer 25 contract. Steep gas withdrawal rates from UK and European storage sites so far this winter, amid reduced Russian pipelined gas, has raised concerns amongst market participants around the refilling of storage sites. European Government intervention which requires storage sites to be 90 percent full by Nov. 1 2025, has given European and UK energy prices underlying support.

Meanwhile, standing charges across the UK are expected to decline from April, with some regional variation.