Energy UK Explains: April 2025 price cap rise

Key points

Ofgem is due to announce the April 2025 price cap on 25 February. It is largely expected to rise from the current level of £1,738 a year for the average use household.
EDF predicts the price cap to be around £1,855, with Cornwall Insight slightly lower at under £1,823.
This will be the third consecutive price cap rise and mean that from 1 April, the cap will have increased circa 15% since September 2024.
The rise in the price cap is overwhelmingly caused by the increase in wholesale costs of energy – primarily the cost of gas – which is bought and sold on a global market.
Long term, the solution is to reduce the country’s reliance on global gas markets by building more homegrown low-carbon sources of electricity.
In the short term, however, although the peak of the energy crisis has passed, high prices are still impacting many businesses and a significant number of households.
Government, industry and charity sectors need to continue to work together to ensure support is available for the most vulnerable households, through financial support ensuring it is targeted well to save the public purse.
Government should also move some of the additional charges currently levied on energy bills to general taxation which is a fairer way to recoup costs, and avoids penalising low-income families with high energy use.

In many electricity markets, including the UK, the cost of generating electricity is set by the ‘marginal cost’ – the most expensive source used to meet demand, which in the UK is often gas-powered plants.
Gas is bought and sold on a global market, meaning no matter how much we have in the UK, it’s generally sold to the highest bidder.
This means the price households (and businesses) in the UK pay for both electricity and gas is heavily influenced by gas prices, causing the price of electricity to fluctuate with gas prices even if cheaper sources are available.
Despite being much cheaper than the peak levels seen in mid-2022, gas prices are still historically high.

Source: ONS

The wholesale cost of gas or electricity often makes up the majority of an energy bill, along with other costs such as network charges, operational costs and policy costs which include support for energy efficiency schemes, for instance.
Because the wholesale price can vary significantly, this means the overall level of the price cap can also increase or decrease in the same way.

Source: Energy UK analysis of what makes up an energy bill – accurate as of January 2025; amounts will be subject to change over future price caps.

Weather plays a role in how much gas is used in the UK. Generally, the warmer the weather the less gas will be used, whereas the colder the weather the more gas will be used.

This was a factor for this winter. January 2025 was colder than the 10-year average in the UK.¹ This has led to higher consumption of gas which added further pressure to prices.
Additionally, Europe is coming out of winter with far lower levels of gas storage compared to recent years. This again has put pressure on prices.

Source: GIE AGSI

Many major economies are also experiencing similar trends when it comes to the price of gas.

Source: ICE, FT

Although other economies also rely on gas, the UK is particularly exposed to price volatility.

Gas plays an important role in our energy system, across electricity generation, industrial and heating needs, but as a country the UK is heavily reliant on it.

Until last year, gas was responsible for being the largest source of electricity generation. This has since been overtaken by wind.

Reliance on gas is also true across the way the UK homes are heated, with nearly three-quarters being heated by gas.² This is far higher than most other developed economies.³

In the long run, building homegrown low-carbon alternatives to gas will mean the country is less reliant on global markets and volatile prices.

Although challenging, this is why the ambition of a clean power system by 2030 is so important.

Households (and businesses) need support. As a first step, customers should always speak to their supplier if they’re struggling.
Suppliers have plenty of ways to offer support, through direct payments, to energy efficiency measures.
This winter, suppliers also came together to provide around £500m of support for customers. But despite this, many people are still struggling.
National Energy Action estimates around six million households are in fuel poverty and Ofgem figures show the current level of increasing household debt also to be deeply concerning.⁴^,⁵
Instead of non-targeted financial support, as was provided to all homes during peak energy prices, the Government has now set up a task and finish group for better data matching, which will ensure public money is spent efficiently while ensuring those who need support still get it.
While the wholesale (most likely gas) price makes up the majority of an energy bill, there are other charges which are recouped through energy bills.
The quickest way to support people is to move some of these costs to general taxation. We have outlined more detailed thoughts on our website.