The Energy Security and Net Zero Committee launched a two-part inquiry on the cost of energy in February 2025, to assess the causes of, and solutions to, high energy costs in the UK1. The first report of that inquiry, Tackling the energy cost crisis, was published on 29 October 2025, with recommendations to government and to Ofgem on supporting consumers1.
The committee states that a typical domestic consumer will pay around £1,720 for their electricity and gas every year under the Energy Price Cap, compared with £993 for a typical household in winter 2020 to 20211. It says the Energy Price Cap is almost 75 percent higher today than in winter 2020 to 2021, and that domestic energy consumer debt reached £4.15bn at the beginning of 2025, the highest since records began1. Wholesale prices account for more than a third of a typical domestic electricity bill and half of a typical domestic gas bill, with the remainder made up of network costs, operating costs, policy costs, VAT and a small supplier profit margin1.
The report attributes the price rise chiefly to wholesale costs, and points to the UK's use of marginal pricing, where the price of electricity is set by the cost of the last and most expensive source needed to meet demand, typically a gas power plant1. It says gas set the price of electricity in the UK 98 percent of the time in 2023, compared with seven percent in France and 24 percent in Germany1.
On standing charges, the report notes that Ofgem reforms to the way costs are calculated under the Energy Price Cap in July 2025 meant the typical electricity standing charge paid by an average consumer fell by five percent compared with the previous cap period, while the typical gas standing charge fell nine percent1. It also cites the implementation of Ofgem's Targeted Charging Review in 2022 to 2023, which it says resulted in a significant redistribution of network costs from the unit rate to the standing charge1. In February 2025, Ofgem announced and consulted on plans to require every energy supplier to offer energy tariffs with low or no standing charges, and announced it would fine suppliers that continue to breach its back billing rules1.
The committee's key recommendations include reforming the Warm Home Discount so that it is more responsive to rising wholesale prices and targeted based on household need, introducing a social tariff and an Energy Debt Relief Scheme, expanding the powers of the Energy Ombudsman, and introducing an opt-in energy bills discount scheme for businesses1.
"In February 2025, we launched a two-part inquiry on _The cost of energy_ to assess the causes of, and solutions to, high energy costs in the UK."
The report notes that in June 2025 the government announced that all named bill payers receiving certain means-tested benefits in England and Wales would be eligible for the Warm Home Discount from winter 2025 to 20261. It states that the social tariff was replaced by the Warm Home Discount in 2011, and that the value of the discount has failed to keep pace with the soaring cost of energy1. In December 2024, Ofgem consulted on a proposed one-off Energy Debt Relief Scheme1.
Why it matters for households
The inquiry's first report sets out the committee's view of why bills remain high and which costs sit inside them. For a household, the split between unit rates and standing charges matters because standing charges are paid regardless of how much energy is used, so a shift of network costs from the unit rate to the standing charge changes the bill for low-use homes in particular1. The report says standing charges have risen significantly over recent years, with a disproportionate impact on low income consumers1. Ofgem's July 2025 cap reforms reduced typical standing charges, and its February 2025 consultation proposed requiring suppliers to offer tariffs with low or no standing charges1. The rules that govern what suppliers can charge, and how those charges are structured, sit within UK home energy regulation and policy, while appliance running costs and efficiency labelling are covered separately under energy labels and ecodesign rules.
What happens next
The government has two months to respond to the report1. The committee says its second report will cover matters affecting the retail energy market, including wholesale markets, policy costs, network and transmission charges and new technologies, and will consider whether the energy transition is likely to reduce costs, over what timeframe, and how best to address gas being the most expensive way to generate electricity and setting the price most of the time1.
Sources1 cited
- Tackling the energy cost crisis, publications.parliament.uk