Energy bills rose by an average of £21 a year on 1 January, due to the new energy price cap coming into effect.
The 1.2% increase took the typical annual bill to £1,738, although the exact price you pay will depend on your usage.
The rise follows a 10% hike in October, due to volatile wholesale prices. The higher energy bills will be particularly felt by many pensioners after losing their Winter Fuel Payment last year.
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The price cap applies to around 27 million households who are on a variable energy tariff. It is updated every three months by the energy regulator Ofgem.
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.
We look at the latest predictions about where bills are headed this year.
Will energy prices go down in 2025?
Energy consultancy Cornwall Insight, which is well regarded for its accurate forecasts, previously predicted that bills would fall by 1.4% in April 2025, which is when the April to June price cap is in force.
However, in a blow to consumers, it has reversed its prediction and expects energy bills to rise by 2.7% in April. The consultancy says "turbulence in wholesale markets" will push the average annual bill up to £1,785 for a typical dual-fuel consumer.
It says that with "a Trump presidency on the horizon, and an uncertain geopolitical situation in the Ukraine and the Middle East, wholesale market volatility looks set to remain".
Dr Craig Lowrey, principal consultant at Cornwall Insight, comments: "The news of a rise in our forecast will be disappointing to households who will no doubt have been hoping for relief from recent cap rises.
"However, the turbulence in wholesale markets - a level of volatility we haven’t seen for months – reminds us to remain cautious of predictions, which could very well increase or decrease several times before the April cap is set."
EDF Energy is predicting a bigger increase for the April to June price cap, to £1,792 a year.
Looking into the second half of this year, Cornwall Insight forecasts a drop in energy bills in July, and a rise in October - although these predictions are likely to change.
Lowrey notes: “To add to the wholesale turbulence, other cost measures being decided upon by Ofgem and the government have the potential to move the cap up or down. As we look ahead, consumers must brace for continued fluctuations.
“Ultimately, the security of energy supply, and Ofgem’s evolving policies will shape the trajectory of bills [during] 2025 and beyond."
The government launched Great British Energy last 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.
Meanwhile, a new poll has found that the vast majority of people are just as worried about paying their energy bills now as they were last winter. According to research firm Strand Partners, 88% of people are as concerned or even more so than last year.
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.
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 if prices drop in July and October. But, 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. 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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