Money blog: Ofgem urges Britons to come off energy price cap - despite announcing big drop for this summer (2025)

The respected analysts at Cornwall Insight were bang on with their predictions for this morning's energy price cap announcement - this is what they think will happen next...

They are expecting the price cap to rise but only by £7 in October, taking it to £1,727 a year.

As they explained, there are still a lot of factors that could change that outlook, particularly the wholesale energy market, which the UK relies on heavily.

The country's reliance on imported energy means it is very vulnerable to international market volatility.

Cornwall Insight said it would also be looking at developments in the Ukraine-Russia peace talks, EU–US trade talks or even changing weather patterns, which could all push prices up or down in the months ahead.

"Lower prices in the warmer months are helpful, but the real benefit could come in October," Dr Craig Lowrey, its principal consultant, said.

"With energy use typically rising as we head into winter, any drop in bills later in the year would be especially valuable for families trying to manage the high costs in the lead up to the Christmas period.

"The outlook may be improving, but we're not out of the woods yet, and energy affordability must remain a priority."

Millions of homes are already paying less than the July price cap for their energy, comparison site Uswitch has said.

It says the 7% fall announced today is a "welcome break in the clouds" but has urged people to look at fixed deals, saying the savings are "far bigger" than the drop.

Richard Neudegg, director of regulation at Uswitch says: "The cheapest fixed deal could save the average household £203 a year compared with the July price cap.

"Millions of homes are already paying cheaper rates than the new July cap, after switching to a fixed deal."

It should be noted that Uswitch is a comparison and switching service, so will benefit from people switching their deals.

The government is working to get the UK off the "rollercoaster of fossil fuel markets" and backed by clean energy, Ed Miliband has said.

The energy secretary welcomed the 7% fall in household energy bills coming in July, but said the only way to bring prices down permanently was to boost green energy.

"We know that it is only through our mission for clean, homegrown power that we can get off the rollercoaster of fossil fuel markets controlled by dictators and petrostates - and give families and businesses energy security and bring down bills for good," he said.

While many have welcomed the 7% fall in the energy price cap, one of the UK's largest trade unions has called for big changes.

Unite said household bills are still "sky high" and "nobody has any faith left" in Ofgem - the energy regulator that sets the price cap.

It said Ofgem had allowed multinational companies to take "obscene profits from our energy bills".

"We urgently need to reverse the market madness and address the real causes of the lingering energy crisis," said Unite's general secretary Sharon Graham.

£3.8bn is currently owed by British households to energy suppliers in arrears.

Moments ago, Ofgem director Tim Jarvis told The Today Programme this was being looked at...

"We have to get on top of that number. It has been increasing significantly over the last year or two, as people have been struggling with their bills.

"And it's a problem, not just for those people who are in debt... and the stress that it causes, but it's something that we all pay for in our prices."

A survey for the debt charity StepChange found 31% UK adults, equivalent to around 17 million people, were worried about paying their energy bills over the next six months.

Richard Lane, chief client officer at StepChange, said: "Urgent steps to eliminate historic debt built up over the energy crisis are needed. It's also essential that suppliers work closely with the regulator to drive up standards in energy debt collection and ensure fair treatment of customers in vulnerable situations."

Today's energy price cap fall will affect every household in the UK, but not in the exact same way.

That's because where you live affects the cost of your energy and how expensive your energy bills are.

Gas and electricity prices vary between regions, even if you use the exact same amount of energy as another household.

Why do prices vary?

The biggest reason for bills varying by region is due to supply and demand.

Energy companies bulk-buy energy from generators to provide homes with power. If it knows an area has lots of customers, the company will bulk-buy energy, meaning the cost per unit in those areas tend to be lower.

By contrast, if there are relatively few people in your area, then the per-unit cost is driven up.

Other factors that affect costs include the fees charged by local distribution networks to energy companies to help distribute energy to homes, which differ depending on which network is used.

Who pays the least and most under current price cap?

The South West has the highest average gas unit rate, paying 7.22p per kWh on average.

Customers in the East Midlands pay the least on average, with a unit rate of 6.85p.

The North Wales and Mersey region has the highest average electricity unit rate, meanwhile, paying 28.50p per kWh.

Households in southern Scotland pay the least on average, with a unit rate of 25.82p.

Energy regulator Ofgem has reiterated its plea for the government to "insulate" the UK from volatile international gas prices.

Tim Jarvis, director general of markets, said: "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."

The energy price cap has fallen for the first time in a year in good news for customers, ourbusiness and economics correspondent Paul Kelso says.

He explains that wholesale prices have been falling for the past three months, which has ultimately shaped the cost of energy in the UK.

"It might be slightly confusing to people who have heard me and others talking about inflation figures two days ago," he says.

"The inflation number for energy had gone up 6%, which was the case back in April.

"But this is a fall and the predictions of the forecast for gas prices are that we'll get further falls in the price cap when the figure kicks in for October and in the new year in January.

"Any certainty about where these prices are going is qualified by the fact that the things that will affect it remain - the weather, Donald Trump's tariffs, the ongoing war in Ukraine."

He says that for now, this is good news and people should look around to see if there are any better energy deals on the market.

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."

The short answer is around £660 (28%) lower than the start of 2023 when the government implemented the energy price guarantee.

However, we are £152 (10%) higher than the same period last year.

This chart illustrates things...