Will gas and electricity bills fall? 2025 energy price forecast
UK energy prices are set to drop 7% from 1 July after the latest price cap announcement, reducing bills for those on a variable rate tariff. Will bills rise or fall in the Autumn?
Energy bills are set to slide this summer in welcome news for UK households.
The price cap will be set at £1,720 per year from 1 July – a 7% drop compared to the previous cap of £1,849.
These figures refer to the typical annual bill for a household paying by direct debit. Those who use more energy will pay more, as the price cap is based on the maximum unit price, not your total bill.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
The price cap is set on a quarterly basis by the regulator. Around 35 million households on variable tariffs will see their bills drop from July. Those on a fixed energy deal will not be impacted by changes to the cap.
The latest price cap forecast from consultancy Cornwall Insight, known for the accuracy of its predictions, suggests prices are expected to remain stable later in the year as we head into the autumn. In figures published on 21 May, the consultancy said it expects bills to rise by just 0.4% in October.
It is worth noting that this prediction was published before oil prices spiked in response to the escalation in the Middle East. Prices have fallen back again in recent days but the situation remains volatile.
A number of other variables are also at play. The consultancy points out that changing weather patterns, the relaxation of EU gas storage rules, the war in Ukraine and ongoing tariff uncertainty could all alter its forecast.
It is also important to put the latest price cap changes into context.
“While it’s important to celebrate the small wins, the energy market remains unpredictable,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.
“We know recent declines in wholesale prices have helped bring the cap down, but global events – from geopolitical negotiations to shifts in trade and weather – can quickly reverse that trend.
“Plus, even with the cap coming down, bills are still higher than what we used to consider ‘normal’, so support is still very much needed. The outlook may be improving, but we’re not out of the woods yet, and energy affordability must remain a priority.”
What do falling energy prices mean for you?
It isn’t bills that are capped, but unit costs and standing charges. Households that use more energy could end up paying significantly more than the £1,720 figure quoted by Ofgem, the regulator, in July’s price cap announcement.
The below table summarises how unit costs and standing charges have changed over the course of this year. It also includes the latest forecast from Cornwall Insight for October.
Swipe to scroll horizontally
Row 0 - Cell 0
January price cap
April price cap
July price cap
October price cap forecast
Electricity unit cost (per kWh)
24.86p
27.03p
25.73p
26.22p
Electricity standing charge (daily)
60.97p
53.80p
51.37p
55p
Gas unit cost (per kWh)
6.34p
6.99p
6.33p
6.05p
Gas standing charge (daily)
31.65p
32.67p
29.82p
34p
Typical annual household bill
£1,738
£1,849
£1,720
£1,726.58
Source: Ofgem (confirmed figures) and Cornwall Insight (October forecast). Typical annual bill based on customers paying by direct debit. Latest Cornwall Insight predictions as of 23 May.
Lowrey points out that lower prices in the warmer months are helpful, but become even more valuable as the weather starts to cool and the heating goes on.
While prices aren’t currently expected to fall in October, a minimal increase of just 0.4% versus July’s cap (based on the latest prediction from Cornwall Insight) will come as a relief, should it materialise.
“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,” he added.
October’s price cap won’t be announced until 27 August, so plenty could change between now and then.
What’s happening with standing charges?
Ofgem is looking to change the way standing charges work, which could mean energy firms are forced to make a dual-pricing offer.
If the proposal is implemented, every energy supplier will need to offer energy tariffs with low or no standing charges. This would give customers greater choice and could reduce energy bills for some households.
Many billpayers consider standing charges to be unfair as they have no control over how much is charged.
In a consultation conducted earlier this year, Ofgem looked at a system of two tariffs – one with a standing charge and one without. The one without a standing charge would have a higher price for each unit of energy. Both tariffs would fall under the existing price cap system.
The consultation closed on 21 March and a decision has not yet been announced.
The plans have been criticised by some charities and energy groups for their complexity. They say vulnerable customers could make the wrong choice, unwittingly paying more for their gas and electricity.
Some high energy users, including those who rely on medical equipment, could also suffer if these costs were added to the unit rate for everyone.
Critics also argue that standing charges won’t become more affordable, they will simply be shifted to another part of the energy bill.
What conflict in the Middle East means for energy prices
Questions over the future of energy prices have been raised following Israel’s strikes on Iran’s nuclear facilities on 13 June after they prompted the price of Brent crude oil to spike.
A rise in the price of oil has implications for the price of energy – there was a similar jump when Russia first invaded Ukraine in 2022, though it was much more pronounced.
In the days since Israel’s initial strike, the price of a barrel of oil has been volatile. It saw a further jump after the United States bombed Iran’s nuclear facilities on 21 June – the price of Brent peaked at around $81 a barrel in the immediate aftermath.
With the US becoming involved in Israel’s conflict with Iran, markets became worried that the overall supply of oil could become restricted, especially if Iran closed the Strait of Hormuz, a passage between Iran and Oman which around a fifth of the world’s oil travels through.
On 23 June, Iran sent a retaliatory strike, targeting a US military base in Qatar before a ceasefire deal was signed in the early hours of 24 June (UK time).
However, the conflict remains ongoing after Israel alleged that Iran broke the terms of the ceasefire and ordered another strike on Iran on 24 June.
Markets seem to be more convinced that the conflict will deescalate as the price of a barrel of oil has eased to around $69 at time of writing, around the same as it was before Israel’s initial strike on Iran.
Victoria Scholar, head of investment at interactive investor, said global oil supplies “are as of yet unaffected by the conflict, which goes some way to explain why oil prices have proven relatively resilient so far.”
However, Scholar warns that “there’s nervousness about the possibility that Iran could retaliate by closing the Strait of Hormuz,” which could prompt a major spike in oil prices.
On 22 June, Iran’s parliament endorsed a measure to close the strait, though the decision whether to do this will lie with Iran’s senior officials.
If the strait is closed, “it could have dangerous consequences for international trade, economic growth and inflation,” according to Scholar, and could potentially lead to an increase in the cost of energy.
This being said, Iran has not moved to restrict the Strait of Hormuz at time of writing on 24 June, and it is indeed unclear whether the country will pursue this option.
Should I fix my energy?
Fixed energy deals currently look competitive compared to the Ofgem energy price cap. Some customers could save £200 annually by shopping around for a fixed tariff, the regulator said.
A lot depends on where prices are heading next and your attitude to risk.
Fixing now risks locking in rates that could become uncompetitive if prices drop in October and beyond. If prices continue to rise, 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. MoneyWeek suggests weighing up the options on the market and assessing whether fixing meets your financial needs.
If you opt for a fixed deal, pay close attention to any exit charges that come with leaving the tariff early.
“Some providers offer deals with no exit fees, particularly for existing customers, so if prices do fall at a later date, they aren’t trapped,” said Alice Haine, personal finance analyst at investment platform Bestinvest. These tariffs can sometimes be more expensive, though.
Haine’s advice is to “consider all options, including cheaper variable tariffs, a tracker product that changes daily based on wholesale cost, or time-of-use tariffs that can benefit people charging electric vehicles overnight or those that want to take better advantage of off-peak rates”.
If you’re struggling to afford your energy bills, don’t bury your head in the sand and build up large debts.
Your energy supplier may offer support, for example, some suppliers have hardship grants. Octopus Energy has Octo Assist and British Gas has the British Gas Energy Trust.
You may be able to get a repayment holiday. This is where you ask your supplier to pause your repayments for a short amount of time to give you some breathing space.
Another option is to agree to an affordable payment plan. You will pay fixed amounts over a set period of time, which will cover what you owe plus an amount for your current use.
If you are on benefits, you might be able to repay your debt directly from your benefits through the Fuel Direct Scheme.
According to Citizens Advice, the Fuel Direct Scheme can be a good option if you can’t agree on a plan to pay back your debt, and it’s usually better than getting a prepayment meter.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Katie has a background in investment writing and is interested in everything to do with personal finance, politics, and investing. She enjoys translating complex topics into easy-to-understand stories to help people make the most of their money.
Katie believes investing shouldn’t be complicated, and that demystifying it can help normal people improve their lives.
Before joining the MoneyWeek team, Katie worked as an investment writer at Invesco, a global asset management firm. She joined the company as a graduate in 2019. While there, she wrote about the global economy, bond markets, alternative investments and UK equities.
Katie loves writing and studied English at the University of Cambridge. Outside of work, she enjoys going to the theatre, reading novels, travelling and trying new restaurants with friends.
8 of the best riverside properties for sale
Will “Liberation Day” strike again?
