Ofgem, the UK’s energy regulator, today confirmed a 2% increase in its energy price cap. This increase would begin in the last quarter of 2025 and expire in December. This move will cost the average household an extra £2.93 on their monthly energy bill. Households with default tariffs will have their bills increase by £100 to £102. The sendout, influenced by international gas market volatility, increases as consumers still struggle in a historic economic downturn driven by the COVID-19 health crisis.
Including the reduced energy price cap, inflation has fallen to 0.9% for this time of year compared with 2024. This drop is after adjusting for inflation. Approximately eight million customers who pay by standard credit could potentially save an average of £135.60 annually if they switch to a fixed tariff.
Overview of Recent Changes
Yet in the previous quarter of April to June 2025, Ofgem delivered another whopping 6.4% rise in the energy price cap. This left the average annual household energy bill at £1,849. This new change is expected to increase prices for consumers on default tariffs by at least £50. Over a third of customers—37%—on fixed tariffs will continue to be insulated from being affected by these moves.
So, Ofgem is urging consumers to check whether they are on the most appropriate payment method and tariff. Changing from traditional credit payment methods to direct debit might result in even bigger savings. The regulator’s guidance underlines the need to look at other ways to avoid escalation of costs.
“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
Customer Impact and Recommendations
The latest energy price cap revision will have the most impact on customers on default tariffs. With international gas markets remaining volatile, Ofgem expects energy prices to continue fluctuating until the UK can achieve insulation from these fluctuations. With this persistent instability, it’s more important than ever for consumers to know their options.
Signs of this positive energy market development were evident, Ofgem’s Market director general Tim Jarvis said. He 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.”
Consumers must weigh the benefits of moving to fixed tariffs. This one clarification, if adopted, would result in many millions of dollars more in savings than the raised cap. Ofgem claims that you would save significantly more using fixed tariffs. In addition, switching your payment method can save you even more on your total energy spend.
Future Outlook
As Ofgem continues to monitor the energy market closely, it remains committed to providing customers with guidance and support during this period of uncertainty. The regulator’s forward-looking moves to foster a competitive marketplace to the consumer’s benefit should be applauded. They’re taking on the challenges of external market pressures as well.