Ofgem hikes energy price cap to £1,738 per year
Th energy price cap for the first quarter of 2025 has been raised by 1.2%, according to a statement on Friday by Ofgem, meaning that the average household could pay up to £1,738 a year on average for electricity and gas.
The widely expected increase, which affects anyone paying by standard credit, direct debit, a prepayment meter or an Economy7 meter, is the second consecutive hike in the price cap, following a similar move in October.
The increase, from £1,717 in the fourth quarter of 2023, equates to a £1.75 monthly increase for households.
Ofgem's director general of markets Tim Jarvis acknowledged that the cost of energy is still a "challenge for too many households".
“Our reliance on volatile international markets - which are affected by factors such as events in Russia and the Middle East – means the cost of energy will continue to fluctuate. So it’s more important than ever to stay focused on building a renewable, home-grown energy system to bring costs down and give households stability," he said.
Ofgem urged energy customers to take advantage of rising choice in the market and hunt for the best deals to keep bills down, after 1.5m households switched tariff over the past three months.
The regulator said there were currently eight suppliers available that sit 10% below the price cap level, though these have a lower standing charge but a higher unit rate – meaning that might not be suitable for every customer.
“Twenty-one pounds might not seem a lot in the grand scheme of things but the fact the rise in the price cap comes off the back of a chunky October increase and is imposed just as households need to use more power will be tough for some to take," said Danni Hewson, head of financial analysis at AJ Bell.
“This year there is no cost of living payment to cushion the impact and for millions of pensioners there’s also the troubling issue of scrapped winter fuel payments."