There is some good news on the horizon for UK households as the ofgem energy price cap is set to be reduced by 7% from 1st July 2025. The reduction in the energy price cap covers the 3 month period between 1st July 2025 and 30th September 2025 and means the typical household costs for energy would drop to £1720.
The previous period from 1st April 2025 to 30th June 2025 had shown a rise and was calculated at a typical cost of £1849. This indicates a saving of around £129 per year for gas and electricity when paying by direct debit. You do not need to be on direct debit payment to be covered by the price cap, but it may affect the costs as often there is a discount for paying by direct debit.
The "typical household costs" are explained in the ofgem online guide: average gas and electricity usage.
This change will not usually affect those on fixed tariffs, although some suppliers allow early exit from the fixed tariff without penalty. Consumers should check with their supplier as there may be options available to them. Obviously the variable energy prices can go up as well as down, so do your research before choosing which tariff and indeed which supplier is the best option for you.
According to octopus energy, price caps are expected to fall further later this year: price cap predictions. You should remember these are predictions and not a guarantee. Other suppliers and industry experts may have different predictions.
The energy price cap affects both the per unit costs of gas and electricity and the daily standing charges. It can also vary by region as shown in the ofgem table here: energy price cap charges per region.
Many factors contribute to the price cap calculation including wholesale costs, network costs and government policies. The most significant factor in the latest calculation is a reduction in the wholesale costs of energy. This is how much an energy supplier pays the generator or market per unit of electricity supplied to their customers.
Energy costs have been driven up following COVID, the Russian invasion of Ukraine and profiteering. They form a significant part of economic forecasts and have contributed to higher rates of inflation over the last few years. Inflation in April 2025 was at 3.5% which is above the government's 2% inflation target. Continuing falls in the energy costs to consumers will help reduce the rate of inflation. Experts predict inflation to peak at 3.7% in the next few months before slowly falling back towards the 2% target.
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