Energy bills will rise by an average £21 per year from January, up 1.2% under the new energy price cap that was set on 22 November. This will take the typical annual bill to £1,738, although the exact price you pay will depend on your usage.
Costs already surged 10% in October, thanks to large increases to wholesale prices. The effects will be felt by many pensioners this year as they lose their Winter Fuel Payment.
The price cap applies to around 27 million households who are on a variable energy tariff. Some customers opt for fixed energy deals in an attempt to shield themselves from price hikes, but taking one out could be a risk depending on what happens to the price cap in 2025.
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We look at the latest predictions about where bills are headed next year.
Will energy prices go down in 2025?
Energy consultancy Cornwall Insight, which is well regarded for its accurate forecasts, previously forecast that bills would fall by 1.4% in April, which is when the April to June energy price cap is in force.
However, in a blow to consumers, it has now reversed its prediction and expects energy bills to rise by 1% in April. The consultancy says "market turbulence and price cap reforms" will push the average annual bill up to £1,762 for a typical dual-fuel consumer.
It points to "the continued uncertainty regarding the future of the Russia-Ukraine conflict and its implications for gas supplies to Europe" and "an impending second Donald Trump presidency and its impact on gas exports from America" as reasons behind the rise.
Cornwall Insight warns that the increase could be even sharper, at 2.5% (taking the average annual bill to £1,782), depending on whether potential reforms are introduced in April.
Dr Craig Lowrey, principal consultant at Cornwall Insight, comments: "Energy bills in 2025 are shaping up to reflect a perfect storm of regulatory changes and market turbulence, in addition to any broader sector reforms put forward by the new government.
"There are a lot of unknowns, and while significant rises in price are currently unlikely, the scale of any increases will depend on how the market and the reforms unfold."
It then forecasts a drop in energy bills in July, and then a small rise in October - although these predictions are likely to change.
The government launched Great British Energy in the summer in an attempt to reduce the UK’s reliance on other countries for its energy supply, but it will be a long time before consumers see the effects of this on their bills, if indeed the project is a success.
What is the long-term outlook for energy prices?
Cornwall Insight says it could be several years before energy bills go back to where they were before 2020.
It predicts that prices will remain relatively flat over the next three years, before beginning to drop away from 2028. By then, it expects improved gas supplies to be better supported by bolstered renewable energy output.
However, the consultancy says wholesale prices are likely to remain well above averages seen from the last decade, even by 2031.
Once inflation is taken into account, they could still be more than 10% above the most expensive prices from the late-2010s.
Cornwall Insight puts this down to a continued European reliance on gas imports.
How have standing charges changed?
Energy customers pay a fixed daily charge covering the costs of being connected to a supply, such as cable and substation maintenance. The amount varies depending on where you live in Great Britain, and it also changes each quarter.
There has been anger about charges going up – in many areas, the charge has doubled over the past two years – and the inability to reduce these fixed fees.
At present, they mean you're paying around £334 a year (£369 for standard credit customers) before you've even used any energy.
In April, Ofgem hiked the amount it allows suppliers to charge due to “increasing network costs”. The regulator recently conducted a consultation into the future of standing charges and said it is reviewing more than 40,000 responses.
The outcome of this review could have a major impact on energy bills. Experts predict scrapping standing charges would see prices rise significantly.
While everyone is seeing an increase in the amount they have to pay to cover the costs of the nation's energy infrastructure, Ofgem has brought standing charges for prepayment meters in line with the rest of the market.
This move means the so-called "prepayment premium" has ended for good, saving households with this type of meter £49 a year, while slightly increasing bills for direct debit customers.
Should I fix my energy?
Fixed energy deals have become increasingly competitive with the Ofgem energy price cap. At the moment, the way to approach the market depends on your attitude to risk.
Fixing now risks locking in rates that could become uncompetitive next year if prices drop in July and October. But, if prices continue to rise next year, you could have saved money by fixing.
If you value cost certainty, opting for a fixed deal means you will know exactly what your outgoings will be for the next 12 months. So, MoneyWeek's advice is to weigh up the options on the market and assess whether fixing meets your financial needs.
How to keep energy bills low
To help you keep energy bills low, we have gathered some top tips in our article looking at 14 ways to reduce your energy costs.
If you're interested in the best ways to improve your energy efficiency and reduce costs, we explore: radiators vs electric heaters, heated airers vs tumble dryers, and wood burning stoves vs central heating.
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