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- No relief for households as gas and electricity costs continue to rise
Millions of homeowners will pay more for energy bills from January after regulator Ofgem announced its price cap will rise to £1,738 a year.
The maximum price, currently £1,717 a year for average energy use, will rise by 1.2 per cent to £1,738 on 1 January 2025.
It means the typical household will pay an extra £21 a year for energy, until the price cap is reset again in April 2025.
The January increase follows Ofgem’s last increase in October 2024, when the price limit rose from £1,568 to £1,717.
The price cap limits the maximum amount an energy company can charge for the gas and electricity units that households use, as well as fixed daily charges.
Most households in the UK have capped energy deals, although the exact amount each household pays varies depending on their gas and electricity usage.
Here’s how much you’ll pay for gas and electricity starting January 1, 2025, depending on how you pay your energy bills.
Boiling point: Price cap increase tightens the screws on households struggling with bills
Electricity rates
If you are on a standard variable tariff (default tariff) and pay for your electricity by direct debit, you will pay an average of 24.86 pence per kilowatt hour (kWh), up from 24.5 pence today.
The daily fixed rate will fall to 60.97p per day, down from 60.99p. This is based on the average for England, Scotland and Wales and includes VAT.
Gas rates
If you are on a standard variable tariff (default tariff) and pay for your gas by direct debit, you will pay an average of 6.34 pence per kilowatt hour (kWh), compared to the current 6.24 pence per hour.
The standard daily charge will be 31.65p per day, a slight drop from the current 31.66p. This is based on the average for England, Scotland and Wales and includes VAT.
Why is the maximum price so important?
The price cap was introduced in January 2019 to prevent energy companies from overcharging customers on variable rate tariffs.
Most households were on fixed-rate energy deals at the time and only moved to variable-rate tariffs if they did not renew at the end of their term.
But after energy bills began to rise in late 2021, gas and electric companies responded by pulling all new fixed-rate deals from the market.
They did this to try to avoid the collapse that many energy companies suffered, which were suddenly forced to sell energy for much less than it cost them to buy it.
Because cheap fixed rate deals had all but disappeared, almost all homes ended up on variable rates regulated by Ofgem’s price cap.
Some cheaper energy deals have been launched that lower the maximum price, both now and when the new one comes into effect on January 1.
What is the future of the maximum price?
The maximum price is reset in April, July and October.
Cornwall Insight believes the average gas and electricity bill will decline later in 2025.
A spokesperson for Cornwall Insight said: ‘Given the price cap increase in October, many will have expected to see a drop in the January cap. Unfortunately, forecasts show prices will remain relatively high for the rest of the winter.
“Looking ahead, we currently anticipate the limit will decrease slightly in April 2025 and again in October 2025.”