Energy price cap: Ofgem announces new UK bills rates increase from April 2025, what is it - how does it work?

• Energy bills are set to rise by 6.4% from April 1 as Ofgem increases its price cap
• The average annual bill for households on a standard variable tariff will go up from £1,738 to £1,849
• Households could pay more or less depending on their energy usage, as the cap limits unit rates, not total bills
• Debt levels are rising, with nearly seven million people now in arrears with their energy supplier
• Switching to a fixed tariff may help some households avoid further increases, but it comes with trade-offs

Millions of households will see their energy bills rise again from April 1 as Ofgem raises its price cap for the third consecutive quarter.

The regulator announced that the 6.4% increase - driven by a recent surge in wholesale prices - will push the average annual bill for households in England, Scotland, and Wales on a standard variable tariff from £1,738 to £1,849.

Ofgem chief executive Jonathan Brearley said: “We know that no price rise is ever welcome, and that the cost of energy remains a huge challenge for many households.

“But our reliance on international gas markets leads to volatile wholesale prices, and continues to drive up bills, which is why it’s more important than ever that we’re driving forward investment in a cleaner, homegrown system.”

The price cap increase follows a warning to households of at least months of pain after the Bank of England forecast higher-than-expected inflation this summer due to rising bills.

But by how much are bills expected to increase in April, and what will the rises mean for your money in real terms? Here is everything you need to know.

How does the energy price cap work?

The energy price cap limits the maximum amount suppliers can charge per unit of gas and electricity, as well as the daily standing charge. But it does not cap the total bill a household pays - only the rates per unit of energy used.

This means actual bills will vary depending on a household’s energy consumption. Those who use more energy than the average estimate will pay more, while those who use less will pay less.

The quoted figures, such as £1,849 per year, are based on an average household using a typical amount of energy.

Households with high energy usage, larger properties, or poor insulation may see higher bills, whereas those who are more energy-efficient could pay significantly less.

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How much are energy bills going up?

The increase will add £111 to the average household's annual bill, equivalent to around £9.25 per month over the three-month price cap period.

This marks a 9.4% (£159) rise compared to the same time last year but remains £531 (22%) lower than the peak of the energy crisis in early 2023.

Brearley added: “Energy debts that began during the energy crisis have reached record levels and without intervention will continue to grow. This puts families under huge stress and increases costs for all customers.”

Citizens Advice chief executive Dame Clare Moriarty said the service was helping people every day who “simply can’t afford this latest price hike” as its latest research showed the number of people living in debt to their energy supplier had reached a new high of nearly seven million.

Dame Clare said: “We’re particularly concerned about households with children, where over one in three struggle to afford bills, rising to more than half of those on low incomes.

“The Government can’t let another winter go by without targeted support for those most in need, and there is a way of paying for this.

“Our recent analysis found energy network companies made billions in excess profits while households have faced soaring bills and it’s only right this money be used to help fund better targeted bill support and much-needed debt relief.”

Can I avoid the energy price cap rise?

To soften the impact of the energy price cap rise, households can consider switching to a fixed tariff, which locks in a set price per unit of energy for a fixed period (typically 12 to 24 months).

Ofgem said four million customers have moved to a fixed tariff since its last price cap announcement in November, taking the total to 11 million, meaning they will not be affected by the increase.

This was the largest movement of customers coming off the price cap and on to a fixed deal since the energy crisis, the regulator said.

The first step to switching is to check whether your current supplier offers a fixed-rate deal, as many providers give existing customers exclusive tariffs that may be lower than the new cap.

If no suitable option is available, comparing deals from other suppliers can help identify a more affordable fixed rate. Price comparison websites and direct provider offers are good places to start.

But while fixing a tariff can bring stability, it’s important to consider the trade-offs. Fixed rates may initially be slightly higher than the new cap, but they prevent further price hikes in the coming months.

Some fixed deals also carry exit fees, meaning switching again before the term ends could incur a charge. Despite this, fixing could be worthwhile for those looking to avoid uncertainty and plan their energy costs more effectively.

What do you think about the latest energy price cap increase? Are you concerned about rising bills, or have you found ways to keep costs down? Share your thoughts, experiences, and any tips in the comments section.