As we usually do, once the calculation period closes, we publish our prediction for the upcoming domestic price cap. The next one being effective 1st July 2025. Ofgem will shortly be announcing the final values.
Our prediction is that the current value (effective 1st April 2025) of £1,849 will DECREASE on 1st July 2025 to £1,745, representing an DECREASE of around 6.5%. In effect this will put us back to where the January 2025 price cap was.
This value is what we refer to as the ‘headline rate’ and is simply a financial value placed on a ‘typical’ customer using ‘average’ usage for both gas and electricity over a year paying by direct debit. There are variances to the amount each household will actually pay depending on the region and how they pay for their energy and so the focus for each household should be on the specific standing charge and unit rate for their circumstances (which will be published by Ofgem by the end of May).
However – understanding the drivers for the overall decrease of some 6.5% are outlined here.
Many households will be pleased to finally see a decrease to the cost of energy to their homes. Whilst many geopolitical factors are still at play, including the ongoing conflict in Ukraine, as well as President Trump announcing tariffs among other things, this shows the the markets can and will remain nervous.
Whilst the wholesale markets remain so, the overall value of wholesale energy has decreased during the calculation period and makes up almost the entirety of the expected decrease. Changes in European gas storage regulations, the potential for a peaceful outcome in Ukraine and resolutions to the US tariffs are all contributing factors to the decline.
We see gas wholesale prices fall by around 11% and electricity by around 13% for the calculation period and products forming part of the price cap calculation. With the other non-wholesale elements remaining stable, we expect the total annual gas cost (at headline level) to fall from £924 to £868 and electricity to fall from £926 to £878.
As always, it is important that households look at their specific circumstances to value the specific impact of this movement to them. This means looking at your specific usage for each fuel and the regional rates that will apply for the payment method you use. The value of £1,745 is not a financial cap to what a supplier can charge you. The cap applies to the standing charge and unit rate and will be multiplied by your specific metered usage.
Should you have any questions about how the price cap impacts you, please seek advice.