As of 1 April, the energy price cap will rise by 6.4 per cent, costing the average household an extra £111 per year.
If you’re on a variable rate, you might be thinking of switching to a fixed-price deal before the new cap comes into place. Should you?
What is the energy price cap?
The energy price cap sets a maximum rate per unit of energy, as well as a maximum standing charge —the fixed daily charge paid in addition to the unit rate— that can be billed to customers for their energy use. The price cap changes every three months and can go up or down.
That said, the cap does not limit how much you pay overall. It only limits standing charges and unit rates for gas and electricity.
In February, the energy regulator Ofgem announced that the energy price cap would rise by 6.4%, which equates to an additional £111 per year for the average household, or around £9.25 per month. This price cap will last from 1 April until 30 June 2025.
For the average household paying for gas and electricity by direct debit, therefore, the price cap will be £1,849 per year. This is 9.4 per cent (£159) higher than the same time last year, but 22 per cent (£531) lower than the start of 2023.
According to Ofgem, the spike in the energy price cap is primarily due to an increase in wholesale prices, alongside a “small increase in policy costs and associated inflationary pressures”.
“We know that no price rise is ever welcome, and that the cost of energy remains a huge challenge for many households,” said Ofgem CEO Jonathan Brearley in February. “But our reliance on international gas markets leads to volatile wholesale prices, and continues to drive up bills, which is why it’s more important than ever that we’re driving forward investment in a cleaner, homegrown system.
“Energy debts that began during the energy crisis have reached record levels and without intervention will continue to grow. This puts families under huge stress and increases costs for all customers. We’re developing plans that could give households with unmanageable debt the clean slate they need to move forward.”
Brearley added: “If anyone is worried about paying their bills, I would urge them to reach out to their supplier to make sure they’re getting all the help they can. Where possible, switching or fixing tariffs now could also help to bring costs down and provide certainty over coming payments.”
To calculate how much the new rates will impact you, you’ll need to find out how much energy you use from your meter readings and multiply this number with the new unit rate (27.03p per kWh for electricity and 6.99p per kWh for gas). Then add on the new standing charge (53.8p daily for electricity and 32.67p daily for gas).
Should you fix your energy rates?
A fixed energy tariff is where your unit rates and standing charge stay the same for the length of your contract with your supplier, while a variable energy tariff means that these can go up or down.
The advantage of a fixed-price deal is that it is not affected by the energy price cap and offers certainty for a set period of time. Those on a variable tariff, meanwhile, may find themselves more susceptible to large fluctuations in price.
Aware of the decision facing customers, many energy suppliers are offering fixed-price deals to entice customers, undercutting the price cap.
Between November 2024 and February this year, Ofgem reported that 4 million customers had moved to a fixed tariff, bringing the total up to 11 million. This, it said, was the largest movement of customers coming off the price cap and onto a fixed deal since the energy crisis began.
As well as Ofgem, commentators like Martin Lewis have recommended moving to a fixed-price deal. Martin Lewis’ rule of thumb, according to Money Saving Expert, is: “If you find a fix for up to 2 per cent more than the current (January to March) or 4 per cent less than the new (April to June) Price Cap, it’s predicted you’ll save over the year compared with staying on the Price Cap.”
Most energy suppliers offer a 14-day cooling off period, which usually starts from the day you decide to switch. If you do decide to switch to a fixed-rate tariff, you’ll still be able to change your mind within that timeframe.
There are other considerations, though. The energy price cap only lasts three months, and predictions from forecasters Cornwall Insight, for example, suggest that it may go down again in July, with further fluctuations possible throughout the year. If the price cap were to go down in future, customers may find themselves tied to a higher tariff.
Likewise, many fixed-price deals charge exit fees, which means that customers may pay more if they decide to change tariff before the term of their contract runs out.
“For some people, fixing their tariff could still make sense. If you’re someone who values stability and wants to know exactly what you’ll be paying each month, then a fixed deal might be worth considering. Households that struggle with fluctuating costs may prefer the security of a set rate, even if it means potentially overpaying for a short period. But if prices do fall as expected, staying on a standard variable tariff would allow you to benefit from those reductions automatically,” says Matthew Sheeran, advisor at Money Wellness, which provides money, debt and budgeting advice.
“Before making any decisions, it’s important to consider a few key factors. First, check the terms of any fixed deal you’re considering. Many come with exit fees, which means you could end up paying extra if you want to switch later. Also, keep an eye on market predictions. Current forecasts suggest that the price cap could drop by around £137 a year from July, which means fixing now might not be the cheapest option in the long run.
“Finally, think about your own financial situation. If you can handle some uncertainty and are comfortable with the possibility of slight fluctuations in your bill for the next few months, it may be best to stay on a variable rate for now.
“Ultimately, there’s no one-size-fits-all answer. If price certainty is your priority, a fixed deal might work for you, but if you’re looking to get the lowest possible cost over the next year, waiting could be the smarter move. Whatever you decide, make sure to read the small print, compare options carefully, and stay informed about any changes in energy prices over the next few months.”
Greg Marsh, household finance expert and CEO of money-saving tool Nous, is similarly cautious about fixed energy deals. “Fixed energy deals have returned to the market – but many don’t offer good value. A fix that looks a bit cheaper than the April price cap could easily end up costing you more over the next year.
“Some deals come without exit fees, so you can switch for now then move back to a variable tariff if prices fall as predicted later in the year. But be honest with yourself – are you really going to remember?”
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