Guide to the January 2025 energy price cap rise

The energy price cap is set to rise in January 2025, which means consumers can expect higher energy bills unless they take action. We’ve created this guide to help you navigate the upcoming price cap increase and make informed decisions.

What is the energy price cap?

The energy price cap is the maximum price that energy suppliers can charge consumers for their energy, set by Ofgem, the energy regulator for Great Britain. It affects how much you pay for both electricity and gas. The cap is reviewed every three months, and it can rise or fall depending on market conditions, including wholesale energy prices, global events, and other factors that can influence the cost of energy.

What does the January 2025 energy price cap rise mean?

In January 2025, the energy price cap will increase by around 1.2%. This increase will affect households on price-capped tariffs, leading to an additional £21 per year for an average UK household using a typical amount of energy. While the standing charges will remain almost unchanged, the cost per kilowatt-hour (kWh) of both gas and electricity will rise.

If you’re using a typical amount of gas and electricity, your bill is expected to rise from £1717 to £1738 per year. This rise is mainly driven due to fluctuations in the energy wholesale market, which remains volatile due to factors such as geopolitical tensions, energy supply disruptions, and inflation.

Breakdown of the January 2025 rates:

• Electricity
  • Unit rate: 24.86p per kWh (up from 24.5p)
  • Standing charge: 60.97p per day (down slightly from 60.99p)
• Gas
  • Unit rate: 6.34p per kWh (up from 6.24p)
  • Standing charge: 31.65p per day (down slightly from 31.66p)

If you’re on a prepayment meter, your standing charges will be the same as for direct debit customers, but the rates per kWh will be slightly lower.

How will the energy price cap affect my bills?

A typical household (using 11500kWh of gas and 2700kWh of electricity annually) could see their monthly energy bill increase from £143 to £145 between January and March. However, your actual bill will depend on how much energy you use. For example:

• Low user (7500kWh of gas and 1800kWh of electricity)
  • Current cost: £1317
  • New cost: £1323
• Medium user (11500kWh of gas and 2700kWh of electricity)
  • Current cost: £1717
  • New cost: £1738
• High user (17000kWh of gas and 4100kWh of electricity)
  • Current cost: £2066
  • New cost: £2097

The rise in the price cap will affect customers differently based on their energy usage, and prices do vary by region and how you pay (e.g. direct debit, prepayment).

Why are energy prices rising?

Several factors contribute to the rise in the energy price cap. Wholesale energy costs are affected by global demand, geopolitical issues, and market volatility. Rising inflation affects production and distribution costs, which energy suppliers often pass on to consumers. Natural disasters or geopolitical tensions can disrupt energy prices, causing increases. Also, government policies to invest in cleaner, renewable energy sources and infrastructure to reduce carbon emissions may also contribute to price increases.

Should I switch energy providers?

Given the rising energy costs, now could be a good time to review your energy provider and consider switching. You should consider:

• Fixed vs. variable tariffs
  Fixed rate tariffs could protect you from future price increases, but they may be more expensive initially. Variable tariffs, on the other hand, fluctuate with the market.
• Comparing tariffs
  Even with the price cap in place, some suppliers may offer better deals or additional benefits. Use comparison websites to see if you can find a better deal.
• Loyalty penalties
  Many people stay with the same supplier out of habit, but this can be costly. Check to see if there are cheaper options available with different suppliers.
• Green energy options
  If sustainability is important to you, consider switching to a provider offering renewable energy. These options can be slightly more expensive, but could be more cost-effective in the long term.

Tips to reduce your energy bills

In light of the price cap increase, consider these actions to keep your energy costs down:

1. Track your energy use
   Smart meters can help you monitor your energy consumption and identify areas where you can reduce usage.
2. Switch off appliances
   Turn off lights, electronics, and appliances when not in use to reduced standby power consumption.
3. Home efficiency
   Insulate your home, use energy-efficient appliances (like ELKATHERM® electric radiators), and install LED lighting to lower your energy use.
4. Go green!
   Investing in solar panels can help you reduce your reliance on grid electricity, saving you money on your energy bills.

Should I fix my energy price?

Fixed-rate energy tariffs could save you money if they offer rates lower than the price cap. However you should be cautious: some fixed deals have high exit fees and energy prices may fall in the future. Compare monthly payments on both fixed and price-capped tariffs before switching.

 Guide to the January 2025 energy price cap rise

The January 2025 energy price cap increase will affect most consumers. While the exact impact will depend on your energy usage, now is a good time to review your energy usage and tariff. By staying informed and considering switching to a more competitive tariff or a fixed deal, you could potentially mitigate the rise in costs.