Energy bills jumped 10% for millions of customers last month - and experts predict that energy prices will edge up again in the New Year.
On 1 October, the Ofgem energy price cap rose sharply after big increases to wholesale prices. The effects of this will be even more pronounced for pensioners who are losing their Winter Fuel Payment this year.
The price cap applies to around 27 million households who are on a variable energy tariff.
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It sets the maximum your energy supplier can charge you for unit rates and standing charges. Your actual gas and electricity bill will depend on how much energy you use.
Under the current cap, the average home pays an annual figure of £1,717 (£143 a month). This compares to the July price cap of £1,568 a year (£130 a month).
The rise effectively wipes out recent falls in the price cap.
While there are some fixed energy deals that can shield you from the price hikes, taking one out could be a risk depending on what happens to the price cap in 2025.
We look at the latest predictions about where bills are headed next year.
Will energy prices go down in 2025?
According to energy consultancy Cornwall Insight - which is widely regarded for its accurate forecasts - the energy price cap is predicted to rise by 1% in January, to reach £1,736 a year.
This works out as a £19 a year increase.
This is a change from its previous prediction back in September when it said that it thought bills would drop by 1% in the New Year.
The consultancy said the small increase reflects a "relatively volatile wholesale market, influenced by supply concerns tied to geopolitical tensions, maintenance on Norwegian gas infrastructure, and weather disruptions".
It added: "Despite prices stabilising in comparison to the past two years, the market remains very sensitive to global events. This is leaving prices substantially above historic averages."
Looking further ahead, Cornwall Insights forecasts that the cap will drop slightly in April 2025 and again in October 2025.
Separate predictions from EDF also suggest the January price cap is likely to rise.
It forecasts an increase to £1,738 in the New Year, up from an earlier prediction last week of £1,736.
David Edmonds, head of pricing and valuations in wholesale market services at EDF, explains: “We have seen greater wholesale market volatility since last week’s prediction after gas markets rose significantly due to the cold weather and concerns over gas supplies from Russia.
"That coupled with conflicts in the Middle East and between Russia and Ukraine, as well as the uncertainty the American election brings to global gas prices are factors in the predicted rise of £21 to £1,738.”
The supplier updates its predictions weekly on its website.
Unlike Cornwall Insight, EDF expects energy bills to rise again in April (with the price cap reaching £1,777), before falling back to £1,731 in July.
The next Ofgem price cap will be in force from 1 January to 31 March 2025.
The regulator will announce the level of the energy price cap on 22 November.
The escalating conflict in the Middle East could drive up energy prices
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 April 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 13 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 stove vs central heating.
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