UK household energy bills to fall after Ofgem lowers price cap 7%

Business Mayor

25-05-2025

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Britain's household energy bills are set to fall in the summer after regulator Ofgem lowered the price cap by 7 per cent, in a boost to Sir Keir Starmer's government as it tries to tackle the high cost of living.
Ofgem on Friday set the price cap for July to September at a level that would mean a typical household pays £1,720 per year, down from £1,849 at present, following a fall in wholesale gas prices.
It is the first reduction in the cap since July 2024 and will provide some relief for households struggling to pay energy bills.
Utility bills helped drive inflation to a 15-month high of 3.5 per cent in April, according to figures released this week, dampening expectations of interest rate cuts from the Bank of England.
Ofgem's move comes as the government this week said it would backtrack on cuts to winter fuel payments for pensioners, following a public backlash.
Despite the cut in the cap, bills will be 9 per cent higher than last summer, said Ofgem, and remain hundreds of pounds a year higher than before the energy crisis that started in late 2021.
Craig Lowrey, principal consultant at market analysts Cornwall Insight, said the reduction in the cap was a 'welcome development' but there remained a risk that 'energy will remain unaffordable for many'.
He urged the government to 'continue to explore targeted support, including social tariffs, to ensure those most in need are not left behind as the market evolves'.
The price cap sets a limit on how much energy companies can charge homes on default tariffs per unit of gas and electricity consumed. It is reset every three months to reflect changes in wholesale prices.
Gas heats the vast majority of Britain's homes and is used to generate more than one-third of its electricity, meaning any changes in wholesale prices have an impact.
Ed Miliband, the UK's energy secretary, welcomed the reduction in the cap, but said prices would only come down 'for good' through the government's plan to build more renewable power capacity.
The UK imports nearly 90 per cent of its gas from Norway and the US, according to official statistics.
Cornwall Insight said wholesale gas prices had fallen in recent months, partly due to mild temperatures and the prospect of a slowing demand in the US.
It expects Ofgem will set the price cap at a similar level for the final three months, a period when households typically consume more energy.
On a per unit basis, the cap for July to September will be 25.7 pence per kilowatt-hour for electricity with a daily standing charge of 51.4 pence. For gas, the cap will be 6.3 pence per kWh with a daily standing charge of 29.8 pence.
That compares with the current cap of 27.03 pence per kWh for electricity with a daily standing charge of 53.80 pence, and 6.99 pence per kWh for gas with a daily standing charge of 32.67 pence.