Energy UK Explains: July 2025 price cap

Key points

Ofgem has today announced that the price cap from 1 July 2025 will be £1,720. This is for the typical dual-fuel household paying by Direct Debit.
This is a £129 (or 7%) decrease from the current level of £1,849 a year.
This latest level, however, is still 34% above the levels we saw before the energy crisis. So while the reduction is welcome, it should be put in context.
The price cap has not decreased since July 2024 when it fell to £1,568 – its lowest level since the beginning of the crisis.¹
The price cap is largely set by the price of gas, on which the UK is heavily reliant for heating, electricity production and industrial uses. Gas markets over the last few years have been volatile, which has resulted in fluctuating price caps.
The long-term solution to this is to build more British power, which will ensure the country is less reliant on fossil fuel markets.
In the short term, however, although the peak of the energy crisis has passed, high prices and debt are still impacting many businesses and a significant number of households.
Government, Ofgem, industry and charities need to continue working together to ensure well-targeted support is available for low-income and vulnerable households, and energy debt is cut.
Additionally, the Government should work with the energy industry and charities to explore moving some of the costs which currently sit on electricity.
This would support households and businesses with their energy as well as having the added benefit of encouraging electrification of heating and other technologies.
This should be carefully considered, however, with care taken to ensure low-income families in particular are not penalised.

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Figure 1: Price cap since 2021 (Source: Ofgem)

Why is the price cap decreasing in July?

In the UK, the price of gas predominantly sets the price of electricity.
The cost (or wholesale cost) of gas has seen a reduction over the last few months, which means the price of energy is falling (and the price cap falling with it).²
Many factors impact gas prices, such as weather, overall demand in the economy and global events.
As the UK approaches the warmer weather over the summer, for example, demand for gas heating will naturally reduce – which has an impact on overall wholesale costs.

Are lower prices here to stay?

Although today’s news is very welcome, wholesale (e.g. gas) costs remain volatile and well above the historic average.
Additionally, wholesale prices for winter 2025/26 have been rising and this reduction may be short-lived.³ However, given how sensitive prices are to global and domestic events, the market could well change as the country gets closer to winter.

Why does the UK have higher energy prices than other countries?

Although other economies also rely on gas, the UK is particularly exposed.
Gas plays an important role in our energy system, across electricity generation and industrial 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.⁴ This is far higher than most other developed economies.⁵

What can be done about this?

In the long run, building more British power will mean the country is less reliant on foreign fossil fuel markets.
Although challenging, this is why the ambition of a clean power system is so important.

And in the shorter term?

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 installing energy efficiency measures.
Last winter, suppliers also came together to provide a one-off package of £500m of support for customers. But despite this, many people are still struggling and the problem is bigger than the energy industry alone can solve.
National Energy Action estimates around six million households are in fuel poverty, and Ofgem estimates household energy debt is nearly £4 billion – more than double pre-crisis levels.^6,7
Energy UK is part of the DESNZ-led data sharing working group, which aims to improve data matching to provide better targeted support to low-income and vulnerable customers.
The Government must also work with industry and charities to reduce the additional costs placed on electricity versus gas, known as ‘rebalancing’.
Energy UK has produced several ways to reduce bills in its paper How to cut bills: A crisis we can’t afford to ignore.