Ofgem announced on Wednesday 27 August 2025 that the energy price cap will rise by 2% for the period covering October to December 2025, and opened a policy consultation package that could affect future energy prices1. The regulator said the cap "will rise by around £2.93 a month for the average household", meaning a typical household on a default tariff will pay £102 for what currently costs £100 per month1.
For an average household paying by Direct Debit for gas and electricity, the overall bill will be £1,755 per year1. Ofgem said this is £625 (26.3%) lower than the height of the energy crisis at the start of 2023, when the government implemented the energy price guarantee, and that year on year, adjusted for inflation, the cap is 0.9% lower than the same period in 20241.
The rise is driven by several cost components. Electricity balancing costs add around £1.23 a month, costs associated with the extension of the Warm Home Discount add £1.42 a month, and adjustments to gas network costs add 72p a month1. Ofgem said the gas network increase is mainly due to lower energy demand and use, a result of warm weather and improved energy efficiency in homes, meaning the costs to run the gas network are spread over a smaller number of energy units1. Standing charges are set to rise by 4% for electricity and 14% for gas, adding a total of 7p per day, primarily driven by the government's expansion of the Warm Home Discount1. Ofgem also noted that its review of operating costs reduced the price cap by £1.79 per month from July this year1.
Wholesale prices are currently stable and have fallen by 2% over the past three months, though Ofgem said unpredictable global events mean they remain volatile1. More than a third of customers (37%) are now on fixed tariffs, and Ofgem said shopping around for a fixed tariff has the potential to save some consumers more than £200 compared to the upcoming price cap level1. It added that 8 million customers pay by standard credit but could be making savings of £135.60 by switching payment method1. Ofgem's figures put around 34 million domestic customer accounts on Standard Variable Tariffs, of which around 20 million are Direct Debit, around 8 million are standard credit and around 6 million are prepayment, with around 20 million accounts on fixed tariffs1.
Tim Jarvis, Director General, 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."
The consultation package contains three parts1. The Nuclear Regulated Asset Base (RAB) consultation seeks industry feedback on how the cost of funding the government's Sizewell C nuclear project will be recovered through the price cap. A call for input covers the proposed extension of the ban on acquisition-only tariffs, which prevents suppliers from offering fixed-term deals exclusively to new customers, ensuring any discounted deals are also made available to existing customers. A benchmark consultation seeks feedback on current average energy usage; the benchmark is used to set the price cap, is based on average energy usage for a typical dual fuel domestic customer, was last updated in 2017 and will be revised to reflect current customer usage.
Why it matters for households
The cap sets a maximum rate per unit and standing charge that can be billed to customers on a default tariff, so the October to December level determines what households not on a fixed deal pay for each unit of gas and electricity they use1. The 2% rise is below inflation, but the standing charge increases of 4% for electricity and 14% for gas apply regardless of how much energy a home uses, which affects the fixed portion of a bill1. Ofgem's own figures show 37% of customers are on fixed tariffs and so are protected from the upcoming rise1.
The three consultations touch on different parts of the price cap methodology. Recovering Sizewell C costs through the cap would place nuclear construction funding within the policy costs and levies recovered from bills. Extending the ban on acquisition-only tariffs affects whether discounted deals must be open to existing customers as well as new ones. Revising the benchmark consumption figure changes the average usage against which the cap level is calculated, and it has not been updated since 20171. Ofgem said it will shortly announce next steps on its debt strategy, which aims to reduce overall levels of household energy debt and bring the debt allowance in the cap down to pre-crisis levels1.
What happens next
The price cap change takes effect for the period covering October to December 20251. The three consultations are open as of 27 August 2025; the source does not give closing dates for them1. Ofgem said it will shortly announce the next steps on its debt strategy1. Queries on the Warm Home Discount, smart meter policies and Nuclear RAB (Sizewell C) are directed to the Department for Energy Security and Net Zero1.
Sources1 cited
- Energy price cap will rise by 2% from October | Ofgem, ofgem.gov.uk