Britain's Energy Price Cap Set to Rise by 3% in April 2025
Households across the UK are bracing for another increase in energy bills. Analysts at Cornwall Insight have forecasted a 3% rise in Britain's energy price cap starting in April 2025. This increase comes on the heels of a 1% rise in January 2025. It adds to the financial strain on millions of families already grappling with the cost of living.
The energy price cap is set by the regulator Ofgem. It is designed to protect consumers from sudden spikes in energy prices. The cap is reviewed quarterly. It is adjusted based on wholesale energy prices, network costs, and environmental and social levies. The forecasted cap for April 2025 is £1,785 per year. This is up from £1,738 per year in January 2025.
The primary driver behind this increase is ongoing geopolitical instability. This has kept wholesale energy prices high. Market volatility is also another factor. Tensions in Europe and uncertainty around gas transit deals have contributed to higher prices. Additionally, higher withdrawals from EU gas storage facilities have added to the market's instability.
Dr. Craig Lowrey, Principal Consultant at Cornwall Insight, commented on the forecast, stating, "The news of a rise in our forecast will be disappointing to households who will no doubt have been hoping for relief from recent cap rises. However, the turbulence in wholesale markets reminds us to remain cautious of predictions, which could very well increase or decrease several times before the April cap is set."
The increase in the energy price cap means that households on standard variable tariffs will see their bills rise, adding approximately £1.75 extra per month compared to the previous cap. This comes at a time when energy bills are already around £700 higher per year than they were in winter 2020/21.
To mitigate the impact of rising energy costs, Ofgem and energy experts recommend that consumers shop around for the best fixed-price deals, which can offer more stability and potential savings compared to variable tariffs. However, there is always the risk that prices could fall before the fixed deal expires2.
As the UK navigates through these challenging times, it is crucial for policymakers and industry stakeholders to work together to ensure fair and sustainable energy pricing for households. The security of energy supply and evolving policies will play a significant role in shaping the trajectory of energy bills as the country moves into 2025 and beyond.
