As the energy price cap rises, Telegraph Money tells you all you need to know
Household energy bills will jump by £221 a year from July, as Ofgem announces the summer rates for the energy price cap.
From July 1, the price cap will rise to £1,862 a year, up from the £1,641 cap set in April, as oil and gas price rises caused by the Iran war filter through to suppliers.
Energy prices tend to be cheaper over the summer months, causing concern among experts over the prices households will face come October.
Those on fixed energy tariffs will be unaffected by price cap changes for the duration of their term – but is now a good time to get a new fixed deal?
In short, if you can fix your energy price around today’s price cap equivalent, it is likely to represent good value for you.
This is because if you can get something close to the current unit rates (24.67p per kWh for electricity, and 5.74p per kWh for gas) and daily standing charges (57.21p for electricity; 29.09p for gas) for the term, protecting you from future rises.
Richard Neudegg, director of regulation at Uswitch.com, said: “July’s serious price rise is the biggest jump we have seen in years, but the real concern is what comes next.
“Millions of households will soon see their energy rates rocket. With prices forecast to stay high, the real pain will come when the heating goes back on in the autumn and through winter.
“Households are on a standard variable tariff by default – so if you haven’t switched, your rates will go up in July unless you take a good fixed deal.
“No one wants to think about winter during hot weather, but fixing your energy deal now means you can opt out of these rises entirely.
“Households can currently lock in a rate that undercuts the July cap by around £250 for the average home. For anyone still on a standard tariff, your bill will go up unless you act.”
In the rest of this article, Telegraph Money goes into more depth about what the energy price cap is, whether it’s time to consider a fixed-term deal, and what you can do now to protect yourself from an energy price rise this winter.
Fixed energy tariffs are deals offered by energy providers that last for a certain amount of time – often around 12 months.
During this time, you’ll pay a set amount for your gas and electricity – your bills will vary depending on your usage; it’s your rate that stays the same.
If you don’t sign up for a fixed tariff, the rate is liable to fluctuate in accordance with the energy price cap.
Providers launch new deals regularly, so it’s worth checking in with comparison websites to see what the best value deal is for you.
All of the top deals from comparison site Uswitch, as of May 27, are cheaper than the July price cap, but some are more expensive than the current cap. They include Fuse Energy’s 13-month deal, which would save typical households £248 on the future price cap, and is £27 below the current cap.
Outfox Energy’s 12-month deal is £1 above the current cap, but would save households £220 once the July price cap kicks in.
See the table below for the top 10 deals:
Other types of deals you might want to consider include:
These are the most common deals. Comparison site uSwitch lists several deals cheaper than current rates.
Some providers offer two-year fixed tariffs, which might suit those who want the peace of mind of knowing their bills won’t be affected by price cap fluctuations.
These deals will see rates change according to wholesale costs, so you’ll be in luck whenever costs fall but could quickly end up with pricier bills when they rise.
These can be good for anyone with an EV charger at home, as they allow you to charge up during cheaper off-peak rates. However, they can be more expensive at “peak” times – such as winter evenings – when there is most pressure on the Grid.
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The last few years have proved how volatile the energy market can be.
When the war in Ukraine began, it kicked off an energy crisis in Britain that upended the market, and meant fixed rates became so expensive that providers stopped offering them altogether. Variable rates governed by the energy price cap were the only viable option.
Competitive fixed rates have since returned, but the cost of energy is expected to rise due to effects of the Iran war causing wholesale prices of oil and gas to increase.
After the price cap reduced in April 2026, July will mark the first price rise as a result of conflict in the Middle East – with more expected later in the year.
As a general rule, if you think the price cap is going to rise in future, and want more certainty over your bills, it could be worth signing up to a fix. It may be more expensive than the current cheaper price cap, but could pay off if energy gets more expensive in future.
Fixing can be worth it when wholesale energy prices are set to increase; those on fixed tariffs will escape the resulting price rises. However, by committing to a fixed deal, you also run the risk of paying over the odds if energy prices fall during your contract term.
Gareth Kloet, of comparison site GoCompare, said the change in price cap is a good opportunity for households to assess whether they were paying a competitive rate for their power use.
He said: “If you are thinking about switching your energy deal, consider whether you will have to pay any early exit fees if you leave before your current deal is up. Looking at all of your options on a comparison site is an effective way to see which options are available to you at the moment.”
Energy providers have ramped up exit fees in recent years, meaning that a household looking to ditch an unfavourable rate will likely pay between £50 and £150 per fuel.
Several providers have introduced fixed rates that are significantly cheaper than the current cap, but these deals may end up costing consumers more in the long run.
Defenders of fixed-rate deals argue they offer long-term security, as unlike variable tariffs they cannot change throughout the duration of the deal. This could shield households from shocks in the wholesale market.
But there are questions about whether the price cap will even exist in the future, as critics have long argued it is playing a role for which it was never designed.
Dr Craig Lowrey, of Cornwall Insight, said: “It’s time for a serious conversation about the long-term future of energy pricing, including whether the cap has outlived its purpose.
“If we want a system that balances consumer protection with supplier innovation while supporting the government’s goals for the energy transition, we need to question whether the cap is helping or holding us back.”
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The main thing to understand when considering a fixed tariff is how the energy price cap is likely to change over the next 12 months or the duration of the deal.
The cap changes every three months, generally getting cheaper in the summer and more expensive over winter. You’ll need to weigh up whether you’ll stand to save money over the duration of the term.
The price cap from April 1 to June 30 is £1,641. This will rise to £1,862 from July 1.
A fixed tariff means your rate will stay the same for the duration of the contract you’ve signed up to; a standard variable tariff means the rate you pay will go up and down according to the price of energy.
Therefore, if you’re on a fixed tariff, changes to the energy price cap won’t affect you – your rate will stay the same until your contract ends. However, for those on variable rate tariffs, bills are likely to get more expensive if a higher price cap comes into force.
The price cap limits what energy providers can charge customers on a “standard variable tariff”. It does not apply to fixed-rate deals. Most households are on variable deals as providers were unable to offer competitive fixes throughout the energy crisis.
The cap is not a limit on the amount households will pay each year. The rate is based on usage – so use more, and you’ll pay more.
The cap is determined by wholesale costs and is revised every three months. The price cap rose from a low of £1,042 in February 2020 to £1,971 in April 2022. As Russia’s war in Ukraine intensified, driving up wholesale prices, the cap continued to rise – eventually reaching a peak of £4,279 in January 2023.
This prompted the Government to intervene in September 2022 by introducing the Energy Price Guarantee, a similar cap on energy bills that limited the average household bill to £2,500 a year regardless of the turmoil in the wholesale market.
From July 2023, when the Ofgem-set price cap finally fell below the government-backed EPG, households on variable deals automatically reverted to the former.
It is important to understand the price cap does not limit the amount you will pay over the year. The amount of energy a typical household uses in one year is known as the typical domestic consumption value (TDCV) – and the headline figure is simply how much the TDCV costs under current market rates.
The cap simply fixes the rates at which you are charged for your gas and electricity usage, as well as the standing charges for both.
Standing charges are billed to households at a daily rate regardless of how much energy they use. As of October, households will pay roughly 53.68p per day for electricity and 34.03p per day for gas.
From July 1, the unit rate for electricity will be 26.11p per kWh, while gas will be 7.33p per kWh, according to Ofgem.
Electricity is up from 24.67p, while gas has risen from 5.74p set by the previous cap.
For cost changes on an annual basis, you can try the energy calculator from Citizens Advice.
According to the figures, under the April price cap you’d spend £11.26 a month if you were to use your kettle for half an hour every day.
Electric showers cost 19p for every five minutes, or £1.30 a week, assuming one shower a day – equating to £70.44 a year.
Washing machines, tumble dryers and dishwashers have always been the most expensive home appliances to run. A typical eco cycle on a fully loaded dishwasher will cost 24p and an hour’s ironing costs 37p, according to Citizens Advice.
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