Energy price cap will fall by 7% from July
Press release
- Publication date
- Industry sector
- Supply and Retail Market
- Licence type
- Electricity Supply Licence
- Gas Supplier Licence
Energy regulator Ofgem has today (Friday 23 May 2025) announced a 7% reduction of the energy price cap for the period covering July to September 2025.
A recent fall in wholesale prices is the main driver of the overall reduction, accounting for around 90% of the fall. The remainder is primarily due to changes to the operating cost allowances energy suppliers can recover. Direct Debit and prepayment customers will see standing charges fall by around £19 per year on average.
The price cap – which sets a maximum rate per unit and standing charge that can be billed to customers for their energy use – will fall by £129 for an average household per year, or around £11 a month, over the three-month period of the price cap.
For an average household paying by Direct Debit for dual fuel this equates to £1,720 per year. This is £660 (28%) lower than the height of the energy crisis at the start of 2023 when the government implemented the energy price guarantee. However, prices remain high with the upcoming level £152 (10%) higher than the same period last year.
Tim Jarvis, Director General of Markets at Ofgem, said:
“A fall in the price cap will be welcome news for consumers, and reflects a reduction in the international price of wholesale gas. However, we’re acutely aware that prices remain high, and some continue to struggle with the cost of energy.
“The first thing I want to remind people is that you don’t have to pay the price cap – there are better deals out there so it’s important to shop around, and talk to your existing supplier about the best deal they can offer you. And changing your payment method to direct debit or smart pay as you go can save you up to £136.
“In the longer term, we need an energy system where prices are insulated from the volatile international gas market, and which ensures more stable prices and energy security. And we’re working closely with government to get the investment we need to reach our clean power and net zero targets as quickly as possible.
“We’re also doing everything we can to support consumers today and pushing ahead with more changes to help consumers. This includes working on ways to support those trapped in energy debt and bringing in reforms to standing charge tariffs for this winter.”
Shopping around for a fixed tariff has the potential to save some consumers around £200 on traditional fixed tariffs compared to the upcoming price cap level.
Currently 35% of customers are on a fixed tariff, up from just 15% a year ago when fewer offers were available.
Ofgem has also today confirmed that from 1 July, standing charges for households paying by direct debit and prepayment will reduce by around £19 on average. This follows the regulator’s decision on the operating cost and debt allowances review.
Operating costs are a key part of the energy price cap. They refer to the costs of running an energy supply business, such as the call centres and metering systems required to serve customers. They also include the costs incurred by suppliers of customers who fall behind on their bills, known as debt-related costs.
Ofgem has carried out its first full review of supplier operating costs since the price cap was introduced in 2019. This is to ensure that costs are fair, accurate, and reflective of the current climate. While costs associated with consumer debt have increased, suppliers have become increasingly efficient and resilient, and as a result operating costs have fallen - creating lasting savings for customers.
Notes to editors
- Read more about the operating cost review and Debt Allowance decisions.
- On bad-debt related costs, Ofgem closed its debt standards and debt relief solution consultation on Thursday 6 February and is working through the responses. The intent is that any changes made would be in place this coming winter. You can read more about the proposals here: Debt strategy.
As at 1 April 2025, 65% of customers were on SVTs (price cap), with 35% of customers on fixed contracts. This compares to 72% of customers on SVTs last quarter (1 Jan 2025) and 85% last year (1 April 2024).
Overall number of domestic customer accounts on Standard Variable Tariffs (SVT) – ‘around 35 million’ of which:
- new no. of SVT Direct Debit accounts – ‘around 21 million
- new no. of SVT Standard Credit accounts – ‘around 8 million’
- new no. of SVT PPM accounts – ‘around 7 million’
Total number of domestic customer accounts on fixed tariffs ‘around 19 million’.
To note, due to a change in how we communicate the number of customers protected by the price cap, these figures are not directly comparable with previous press notices. This methodology change aims to improve the accuracy of data, which is now based on the total number of gas and electricity accounts, as opposed to estimating households by proxy.