Today in Money: we bring you the latest as the new energy price cap is announced – and it’s risen by even more than experts predicted. You can also watch our special report on the UK’s precarious food security below.
Wednesday 27 August 2025 08:38, UK
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When Ofgem sets the energy price cap, it looks at what’s happened to eight costs.
If they go up, so does the cap – and if they fall, it tends to follow suit.
Here’s a list of the costs the regulator analyses:
The data released by Ofgem today shows the biggest uptick will be in network costs, which will rise by £24 from 1 October.
This is followed by government policies, with the expansion of the warm home discount playing a major role in the 2% cap rise.
Take a look at the changes below…
The energy price cap sets the maximum amount suppliers can charge you for each unit of energy and the daily standing charge.
The £1,755 figure given by Ofgem today reflects the average dual fuel household’s annual bill.
Your actual annual bill will be different depending on how much energy you use. The more gas and electricity you use, the more you pay.
Ofgem makes changes to four specific charges under the price cap – you can see these below…
It should be noted that prices vary depending on where you live, how you pay your bill and the type of meter you have, meaning some people are charged less than the cap.
Remember, the cap just sets a maximum that suppliers can charge you.
The standing charge is a cost set by your supplier. It covers the costs to:
You pay this charge each day just for being connected to the energy network – even if you don’t use any energy.
Campaigners have long called for it to be cut, saying it penalises households on lower incomes and those looking to cut their usage.
MoneySavingExpert Martin Lewis has previously called the standing charge a “moral hazard” as it disincentivises people from cutting their energy use.
Here’s how much of your annual bill is made up of the charge…
People are being urged to fix their energy deal before the higher price cap comes into force, with around 27 deals already on the market offering lower prices.
From 1 October, the average dual fuel household’s annual bill will rise by £35 to £1,755.
This applies to around 20 million people in England, Scotland and Wales on standard variable or default tariffs.
But comparison site Uswitch says there are fixed deals offering savings of around £292 a year.
Here’s a look at the cheapest deals currently available…
“This is a wake-up call for households on price cap-linked tariffs to lock in cheaper fixed rates to cover the critical winter period,” says Richard Neudegg, director of regulation at Uswitch.
“We all typically use a lot more energy over winter compared to summer. The cost of doing nothing now means an extra £76 more per month on average for energy bills from October to December, on top of rates already higher than the majority of fixed tariffs.”
He says households should run a comparison and review the options available for their usage levels and region.
“Fixing your energy tariff to cheaper rates should be a no-brainer for all households who are able to,” he adds.
The government’s warm home discount scheme and volatile gas prices are the cause of the small, but unwelcome, increase to the energy price cap, our business and economics correspondent Paul Kelso says.
“It’s not a rise of very much, but it is an increase and obviously it’s coming at a time of year when people start putting the heating on,” he says.
“Prices will rise marginally, but they did go down by 8% in the second quarter of the year, so we’re still net down on that.”
He explained that part of the increase is due to the government expanding the warm home discount scheme, which gives £150 to an extra 2.7 million vulnerable households.
“The cost of that falls on all of us as bill payers,” he says.
However, the “biggest driver” of the 2% increase is wholesale gas prices, which have been volatile over the past three months while Ofgem assesses the cap.
“Donald Trump’s trade policies on global demand pushed prices down a bit, but we saw the attacks by Israel on Iran, which pushed them up because of concerns over liquified natural gas,” Kelso adds.
Watch his full analysis below…
More than a third of households (37%) are now on fixed tariffs, which means they are protected from the upcoming rise, Ofgem figures show.
There are around 20 million homes in England, Scotland and Wales currently locked in to energy deals – roughly the same number that are paying the price cap.
Another 14 million households either pay monthly outside of direct debits or have prepayment meters.
Ofgem has told households that moving to a fixed tariff energy deal could save them more than £200 compared to the newly-announced price cap.
The cap, which will come into force in October, will see average energy bills rise by 2% to £1,755 for around 20 million homes.
Tim Jarvis, director general of markets at Ofgem, said: “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.”
He said there are signs of a “healthier” energy market, but the regulator is still expecting to see some “fluctuations” in prices in the longer term due to volatile international gas markets.
“That’s why we continue to work with government and the sector to diversify our energy mix to reduce the reliance on markets we do not control,” he added.
The average annual energy bill will rise by more than expected in October, Ofgem has announced.
Major forecasters Cornwall Insight had anticipated a 1% rise to the energy price cap, taking it to £1,737.
But the energy regulator has increased it even further, taking it up by 2% to £1,755.
It’s an increase of £35 from the current cap, which is the typical sum most households pay for gas and electricity when using direct debit.
This equates to an average monthly increase of £2.93.
Those on fixed-rate deals will see no change until their current term expires.
The price cap limits the amount suppliers can charge per unit of energy and is revised every three months.
The energy price cap limits what utility companies can bill customers for a daily standing charge and each kilowatt-hour of gas and electricity they use.
Ofgem, the regulator, sets the cap quarterly and estimates how much the average household would typically pay over a year at the new unit price.
Here’s what it actually caps:
Until 30 September, gas prices are capped at the reduced level of 5.48p per kilowatt-hour (kWh) and electricity at 22.36p per kWh.
Standing charges are currently around 60p a day for electricity and 31p a day for gas (though they vary by region).
The real annual cost per customer will be different depending on how much energy you actually use. The more gas and electricity you use, the more you pay.
Ofgem’s price cap only applies to people in England, Scotland and Wales on standard variable or default tariffs.
This covers most households, whether you pay by direct debit or a prepayment meter.
It doesn’t apply to people still on fixed-rate tariffs.
We’ll find out the new energy price cap a little later this morning – and it doesn’t look like it’s going to be good news.
Ofgem sets the price cap each quarter, meaning the figures announced today will be introduced in October and last until December.
Energy consultant and major forecaster Cornwall Insight predicts energy bills will rise by £17 to £1,737 a year for a typical dual fuel household – a 1% increase from today’s rate of £1,720.
Here’s a breakdown of the changes it is anticipating…
Why is the cap likely to rise?
Cornwall Insight says its forecast reflects changes it assumes Ofgem will make in October to cover the expansion of the warm home discount, which was announced by the government in June.
The scheme, which gives financial help to vulnerable households, will add around £15 to a typical bill while providing £150 of support to 2.7 million additional people, according to the prediction.
Read more about the scheme here…
Wholesale gas and energy prices have also been volatile, largely due to global conflicts and Donald Trump’s US trade policy, but have been on a general decline recently.
Dr Craig Lowrey, principal consultant at Cornwall Insight, says: “News of higher bills will not be welcomed by households, especially as winter approaches.
“While the added costs behind this forecasted rise are aimed at supporting those most in need, it does mean typical bills will increase despite relatively lower wholesale costs. It’s a reminder that the price cap reflects more than just the market price of energy.
“This immediate challenge underscores a broader uncertainty facing millions of households, with current forecasts suggesting a sharp drop in bills is unlikely in the near term.”
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