Ofgem increases energy price cap by 6.4%  

UK energy regulator Ofgem has announced a 6.4% increase in the energy price cap from April to June 2025. The price rise is largely in response to a recent spike in wholesale prices.

The price cap sets a maximum rate per unit and standing charge that can be billed to customers for their energy use. It will rise by £111 for an average household per year, or around £9.25 a month, over the three-month period, says Ofgem.

For an average household paying by Direct Debit for dual fuel, this equates to £1,849 per year. This is 9.4% (£159) higher than this time last year (£1,690) but £531 (22%) lower than at the height of the energy crisis at the start of 2023, when the Energy Price Guarantee was in place, it adds.

Since the last price cap announcement in November 2024, four million customers have moved to fixed tariffs. This brings the total to 11 million that won’t be affected by the change in the price cap, says the energy regulator. ‘This is the largest movement of customers coming off the price cap and on to a fixed deal since the energy crisis,’ it notes.

UK government to extend household energy bill support

In response to the price cap increase, the UK government is consulting on expanding the Warm Home Discount scheme, which provides eligible households £150 off energy bills. This would bring a further 2.7 million households into the scheme – pushing the total number of households that would receive the discount next winter up to an estimated 6.1 million, it says.

The government has also stated its support for Ofgem’s plans to establish a debt relief scheme, first consulted on last year, to target unsustainable debt built up during the energy crisis. The aim is to ‘reduce the debt allowance to pre-crisis levels’, with Ofgem estimating it could lower these costs to all consumers by £25 to £30 per year.

‘The expected rise in the price cap shows once again the cost of remaining reliant on the unstable global fossil fuel markets that are driving price increases,’ comments the UK government. ‘Three years on from Russia’s invasion of Ukraine, wholesale gas prices have now risen by 15% compared to the previous price cap period, which is directly affecting the cost of generating power and heating of homes.’

Call to invest in electricity distribution networks  

In related news, a ‘step change’ in investment in Great Britain’s local electricity networks is ‘essential to achieve the government’s growth mission and lower long-term energy costs for consumers’, according to the government’s independent infrastructure advisor.

The National Infrastructure Commission’s (NIC) new report Electricity distribution networks: Creating capacity for the future says that with demand for electricity set to double by 2050, the current pace of additional investment in the country’s electricity distribution networks must also double. This is necessary ‘to ensure the system can cope with rising demand and connect both new sources of renewable power and new electricity demands to the grid faster’, it says.

The NIC believes Ofgem’s current regulatory framework is ‘too complex’ and does not incentivise distribution network operators (DNOs) to make the necessary proactive investments. The report urges a more forward-thinking approach to energy regulation and system planning. The NIC projects that while this level of investment could add between £5 and £25 to the average annual household electricity bill by 2050, electricity bills would still be lower than today, provided the government implements all recommendations from the second National Infrastructure Assessment on low carbon energy and heating decarbonisation.

Failure to improve the connectivity process to the distribution grid will hinder economic growth and delay the government’s clean power by 2030 timeline, warns the NIC. Currently, connection times are lengthening and customer experiences vary significantly, it says.

To address these issues, the NIC recommends that Ofgem introduce new service standards for DNOs, ensuring commercial customers have a consistent connection experience. Additionally, implementing more robust incentives for larger connections and higher performance expectations could drive improvements across the entire process, it suggests.

Barriers constraining future investment should also be tackled, says the NIC. The report proposes a series of procedural changes to the planning system aimed at reducing uncertainty for network operators. This adds to existing NIC advice to government on speeding up approval of new infrastructure projects.

The NIC advocates expanding flexibility measures to manage demand. This would include enabling households to use electricity at times of lower demand, such as charging electric vehicles at night, thereby reducing electricity costs.

Addressing the skills gap is also crucial, the NIC advises. Furthermore, the report suggests examining supply chain support mechanisms, similar to those used for the electricity transmission supply chain, and applying them to the distribution network.

Nick Winser, National Infrastructure Commissioner, comments: ‘We need an electricity distribution system that’s flexible and smart enough to optimise the benefits of this bigger and more complex network and drive down costs for consumers as quickly as possible. Every part of our electricity sector must play its part in supporting economic growth, and distribution networks are no exception. But that requires a more strategic approach that empowers proactive investment and ensures network operators do more to make connections easier and faster for more businesses.’