Blog | Fused Bills

What's happening with the energy price cap?

Written by Fused Bills | Feb 27, 2024 4:29:58 PM

Every three months the energy price cap is updated, which changes the maximum amount that energy suppliers can charge for their standard variable tariff, which is the default tariff from all suppliers. 

The next update to the price cap will be on April 1st 2025.

Here are some links to some handy bits of this blog:

What is the Ofgem energy price cap and how does it affect student bills? 

  • The price cap is the maximum price suppliers can charge per unit price of energy. Energy is measured in kWhs (kilowatt hours), and energy costs are based on the kWhs used in your household.
    • A tariff sets the price you pay per kWh for your energy.The price cap sets the price for the Standard Variable Tariff (SVT), which is the default tariff offered by energy suppliers.
  • The Ofgem energy price cap is currently set every 3 months
  • Usually price cap headlines report the changes as the  annual bills for an "average household".
    •  This makes it easier to translate into real terms for most people, but doesn't mean everybody's bills will be that amount. 
    • Ofgem, the government energy regulator, uses a 2-3 bedroom property with 2-3 people living in it as their example household.
  • Most headlines use costs for households that use gas and electricity also called dual fuel households.

  • The price cap was designed to prevent customers from being hit too badly by changes in the energy market. The energy crisis proved that this doesn't always work out in extreme circumstances.

What is a kilowatt hour?

The Ofgem energy price cap is priced per kilowatt hour.

Kilowatt hours are the units used to measure the power you use. Gas and electricity are both measured in kWh, and if you have a traditional capped energy deal from a supplier, you'll be charged for each kWh you use during your contract.  

Ofgem says that one kilowatt hour (kWh) is the amount of energy it would take to power a 100-watt lightbulb for 10 hours or a fridge-freezer for 26 hours. An electric oven uses 2kWh every 30 mins. If you wondered.

When will Ofgem announce the next price cap?

The next price cap will come into effect on April 1st 2025. As of 6th February 2025, it is currently predicted that the Ofgem price cap will increase by around £100. 

Exact prices are always announced in advance so suppliers and consumers can get ready for the change in prices. January 2025 energy prices were announced in November 2024.

Fused customers will get get at least 30 days notice of price updates, so keep an eye on your emails.

How much is the current energy price cap?

The price cap from January 1st - March 31st 2025 is:

  • 24.86p per kWh of electricity, and 60.97p daily standing charge
  • 6.34p per kWh of gas, 31.65p daily standing charge. 

That puts the annual bill for that "average household" at £1,568 a year. But remember, suppliers charge customers per unit, so everybody's bills will look different depending on how much power they use.

Is the next price cap predicted to go up or down?

The next price cap will come into effect from April 1st 2025. As of 6th February 2025, it is currently predicted that the Ofgem price cap will increase by around £100, rising from the previous £1,738 a year for the "average" household. 

How does my energy usage affect how much I'll actually pay?

If you're on a capped energy deal (rather than an Unlimited Energydeal from Fused) you'll be charged per unit of energy you use at the current price per unit:

  • If you're on a prepayment meter, you pay for energy in advance, rather than by direct debit, so the following info isn't as relevant to you.

Your usage is measured by your energy meter, which is why it's always important to submitmeter readings.

  • Regular meter readings mean your bills reflect your actual energy use, rather than estimates, helping you avoid being overcharged, or undercharged (which means a big bill later on). 

Your energy meter measures how many units of energy you use, which is why the price per unit has the potential to have such a big impact on your bill. 

Your monthly direct debit for gas and electricity bills is usually set at a fixed price, but you'll be charged extra if you use more than your usage limit. 

Despite using similar terminology, a capped energy deal and the energy price cap aren't related.

  • A capped energy deal means there's a limit to how much power you can use for the price you pay.
  • The energy price cap is a limit on how much a supplier can charge you per unit of power.

Find out more in about how bills work inguide to bills for students.

Or take a look at a deep dive to the alternatives to capped energy deals with our Unlimited Energy for students page.

Will my smart meter update automatically after the price cap?

Some smart energy meters won't update automatically, so might show the wrong rate for energy. You'll still be billed correctly, though, and your supplier will keep trying to update it, so eventually it should reflect the actual cost of the power you use each day.

Will all energy suppliers change their prices after the energy price cap?

All energy suppliers will change the price of their standard variable tariff after the price cap. If you're on a fixed energy tariff, your price won't change because of the price cap, but you may default to the SVT at the end of your contract.  

Why only people on variable tariffs will be affected by the price cap change (and why so many people are on this type of tariff at the moment)

The energy price cap only affects the price of the standard variable tariff. The price changes in response to changes to wholesale costs in the energy market. This explains the variable part of the standard variable tariff (SVT).

A fixed tariff keeps the price of energy the same throughout your contract - you'll always pay the same per kWh of energy, no matter what happens with the cost of energy. This caused problems during the energy market when wholesale energy prices increased dramatically.

  • Lots of suppliers had customers on a fixed tariff when prices skyrocketed, any many of them went out of business. 
    • Fixed customers weren't paying enough to cover what suppliers had to pay for energy.
    • Many suppliers didn't hedge their energy, which put them at greater risk of changing prices. 
  • Energy providers stopped offering fixed tariffs for a while during the energy crisis.  Changeable energy markets made them too risky.

How will the next energy price cap affect my bills?

If you're on the standard variable tariff, the amount you pay for energy will change after the price cap. This is true every time the price cap changes, if you're on a SVT.

Your new monthly direct debit will reflect the changes per unit of energy from the date the price cap comes into effect. The price cap also affects how much energy companies can charge you for your daily standing charge.

If you're a Fused Bills customer

You'll always get at least 30 days notice of any changes to your monthly payments.

How the SVT affects your payment will depend on the type of package you have. You can get in touch via your customer dashboard if you have any questions.

When you sign up for your Fused package, your quote is based on the cost of energy for the whole of your contract. If the costs we base your package on turn out to be different than the price cap that's actually announced, your price will be updated.

If you're not a Fused customer, but you like the idea of a bills package, why not find out what a bills package is and how it could simplify your finances?

What does Ofgem, the energy regulator, do?

Ofgem is the independent energy regulator for Great Britain, which is England, Scotland and Wales. Northern Ireland is covered by a different regulator.

They work with the government and energy suppliers on behalf of energy bill payers. Part of their role is to make sure energy is sustainable, customers get the right information and services from their suppliers, and manages prices with the energy price cap.

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