Energy bills to fall as Ofgem announces new price cap - what it means for you

Millions of households will see their fall this summer after announced its new price cap.

The price cap is going down by 7% - although there is no actual cap on how much you can pay for energy. Your bill is dependent on how much gas and electricity you use.

For the average dual fuel household paying by direct debit, their annual energy bill will fall from £1,849 to £1,720 from July - a reduction of £129.

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The price cap for someone paying by pre-payment meter is falling from £1,803 a year to £1,672, and the yearly charge for someone who pays on receipt of bill is going down from £1,969 to £1,855.

However, families are still paying far more for energy than they used to. The price cap had increased three times before this announcement - it went up by 10% in October, then by another 1.2% in January and finally by 6.4% in April.

The price cap changes every three months, so the new level will be in place until September 30, when it will then be updated again.

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.”

Natalie Hitchins, Which? Home Products and Services Editor, said: "Many households will be relieved to hear the energy price cap will fall by 7% in July.

"This means summer could be a good time to shop around for fixed deals. As a rule of thumb, we'd recommend looking for deals cheaper than the price cap, not longer than 12 months and without significant exit fees.

"If you are on a fixed deal which will be more expensive than the July price cap then it's worth checking your exit fees and considering switching if you are on a deal with no charges to leave early."

What is the Ofgem price cap?

The Ofgem price cap does not put a limit on how much you can pay for energy. It sets the maximum you can be charged for unit rates of gas and electricity, plus your standing charges, which are a fixed fee that you pay to be connected to the grid.

This means your bill can be higher or lower than the main price cap figure, which just represents what the average billpayer can expect to pay. Ofgem comes up with this figure based on how much energy it estimates the average household uses.

Ofgem says the typical home uses 2,700 kWh of electricity and 11,500 kWh of gas over 12 months. Your location can also affect your bill, as unit rates vary by region. There are also different rates for prepayment customers and those who pay on receipt of bill.

It is also worth keeping in mind that even though the price cap represents a yearly bill, it is actually updated every three months to take into account fluctuating wholesale energy prices. The price cap used to be updated only twice a year, so every six months.

What are the unit rates and standing charges?

The average unit rate for gas is falling from 6.99p per kilowatt hour (kWh) to 6.33p per kWh, while the standing charge is going down from 32.67p a day to 29.82p a day.

The average unit rate for electricity is falling from 27.03p per kWh to 25.73p per kWh. The standing charge for electricity is decreasing from 53.80p a day to 51.37p a day.

These are representative of the average direct debit bill across England, and Wales. There are different unit rates and standing charges for prepayment customers and those who pay on receipt of bills.

Who is on the Ofgem price cap?

There are around 22 million people in England, Wales and that are currently covered by the price cap. The Ofgem price cap covers anyone on a standard variable rate (SVR) tariff - so if you're not currently fixed into an energy deal.

This could be because you didn't fix into a new deal after your existing tariff expired, or you didn't fix into an energy deal after moving property. You can contact your current energy supplier to see what type of tariff you're on.

How does Ofgem calculate its price cap?

The largest cost that makes up the price cap is wholesale energy, which is what energy suppliers pay for gas and electricity. The assessment period for wholesale energy prices for the April 2025 price cap was February 18, 2024, to May 16, 2025.

There are other elements that are taken into account as well. Ofgem looks at the cost of maintaining pipes and wires that carry gas and electricity, network and operating costs, as well as VAT, payment method allowances and profits for the energy supplier.

Ofgem will announce its October price cap by August 27, 2025.

Why are energy prices falling?

Cornwall Insight, which has a track record of accurately predicting the next energy price cap, says energy prices are falling due to lower wholesale costs.

Its analysts currently predict the energy price cap will fall again in October, followed by another drop in January 2026, in what would be welcome news for households.

However, they warned a range of factors could change these forecasts, including patterns, the relaxation of EU gas storage rules, US tariffs and the war in .

How can I cut my energy bill?

It sounds obvious, but the first thing you can do is try and use less energy. This can be simple things like making sure you turn the lights out when you leave the room, or switching off appliances so they're not on standby.

Next, check your home to see if there are any ways you can make it more energy-efficient. For example, installing insulation, draught-proofing and switching to energy-efficient appliances and lighting.

If you're struggling, talk to your energy provider as soon as possible. Some of them have hardship funds that don't need to be paid back, and these can help you pay off energy debt.

You should also keep an eye out for energy schemes this winter, including the Warm Home Discount which gives you £150 off your electricity bill. There are also worth £25 each and Winter Fuel Payments for pensioners, worth up to £300.