Energy Prices to increase October 1st 2025
Energy Prices to increase October 1st 2025
The price most households pay for gas and electricity will rise by 2% on average from Wednesday 1 October as energy regulator Ofgem has announced the latest Energy Price Cap rates.
Ofgem's Price Cap dictates the rate all homes, except in Northern Ireland, on standard tariffs pay. That's the two thirds of domestic properties, which aren't on fixes or special deals. The regulator has just announced the Price Cap will rise at the upper end of predictions, UP 2% for the 1 October to 31 December Price Cap.
THE KEY ACTION – DITCH THE CAP IF YOU CAN!
Now we know the Cap will be at the current rate or higher until at least the end of the year, it's easy to compare to the cheapest fixes...
They are on average nearly 17% less than the October Cap rate (c. £250 a year cheaper on a typical bill).
And have guaranteed rates, so you know they won't rise for at least a year.
That means for those on a capped tariff, switch to a fix and your energy use immediately costs less and is guaranteed to do so until at the very least the 31 December, but almost certainly well beyond that too...Analysts' current predictions are that the Cap will drop slightly in January 2026 (down 2% ish), then rise again in April (up 5% ish) – though this involves some crystal ball gazing as much can change.As your cheapest fix depends on your location, usage, payment type (sadly there are no non-smart prepay fixes).
LOWER USERS HARDER HIT BY THE CAP RISE
While half this rise is due to wholesale costs increasing slightly on average over the assessment period, the rest is due to 'network and policy costs' increases, and they are lumped into the standing charge – the daily rate you pay.The average standing charge is rising 4.5% for electricity users and 14% for gas. To put it in context; if it stayed at this level over a year, you'd pay a horrific £320 a year (on average for Direct Debit) just for having the facility of gas or electricity even if you didn't use it.That means lower users will be disproportionately hit, with some facing effective rises of 5% or more. Yet perversely, higher users gain, as the rate for each unit of gas you use is being cut. So high users who use a lot of gas may see a rise of just 1% ish.This is a moral hazard. And especially terrible for many older people who only use their gas in winter. The standing charge needs to be reworked.
How the Price Cap works and what's changing from 1 October
The Energy Price Cap sets a limit on the maximum amount suppliers can charge households on standard or default variable tariffs (essentially everyone not currently on a fix) for each unit of gas and electricity they use, and sets a maximum daily standing charge (what you pay to have your home connected to the grid).
There's no actual cap on what you pay, so if you use more, you pay more. The Price Cap changes every three months and is now set to rise slightly. You can see the average unit rates and standing charges until Tuesday 30 September under the current Cap, and what they will be under the new Cap from Wednesday 1 October 2025 below.
Average standing charges and unit rates from 1 October if you pay by Direct Debit
Rates and standing charges are averages, which vary by region. Assumes payment by Direct Debit and includes VAT (at 5%). For those who pay each month after getting a bill, it's 8% higher, on average. If you prepay for your energy, it's 3% cheaper, on average.
On an average annual basis, here's what the Cap will be set at from 1 October – but remember, it's the rates that are capped, so use more and you pay more:
If you pay by monthly Direct Debit, it'll be £1,755 a year on average for a typical dual-fuel household. This is a rise of 2%.
If you prepay for your energy, prices will rise by 2.1% to £1,707 a year.
If you pay on receipt of a bill, it'll be a 1.9% rise to £1,890 a year.
Rates vary by region.
Price Cap rise largely driven by higher standing charges
The rise in the Price Cap from 1 October is largely driven by higher standing charges – what we all pay just for the facility of having gas and electricity. These costs will increase slightly from an average of £296 a year to an average of £320 a year for Direct Debit users. That's what you'll pay before you even use any gas or electricity.
In December 2024, Ofgem proposed requiring suppliers to offer a 'low or no standing charge' option, which would be controlled by the Energy Price Cap. The regulator began consulting on the details of the scheme in February. In July, Ofgem then announced that it was looking at whether suppliers should offer low or no standing tariffs that aren't part of the Price Cap.
The regulator is expected to consult further on this in the autumn. It says it wants to see new low or zero standing charge tariffs being offered from January 2026.
What happens after October's Price Cap?
Current analysts' Price Cap predictions are that after October's rise, the Cap will fall slightly in January 2026, before rising again in April next year. Though the further out you go, the more crystal-ball gazing that is.
How to check if you're on a Price-Capped tariff
If you're not on a fix or special deal you are likely to be on the Price Cap. These are firms' standard default consumer tariffs, often called 'Standard Variable' or 'Flexible' tariff
If you don't know for sure, assume you, like two thirds of homes, are probably on a Price-Capped tariff.
Best way to reduce your electricity and gas bills
If possible reducing your grid consumption is still the best way to reduce your overall bills.
This can be achieved by installing Solar PV, Battery Storage, Eddi Hot water heaters and energy efficient heating.
If you would be interested in finding out more or would just like advice please get in touch with Smarter Green Energy!
