Ofgem price cap LIVE: Huge £129 boost to Brits after today's announcement
Operating costs are a key part of the energy price cap. They refer to the costs of running an energy supply business, such as the call centres and metering systems required to serve customers. They also include the costs incurred by suppliers of customers who fall behind on their bills, known as debt-related costs.
Ofgem says it has carried out its first full review of supplier operating costs since the price cap was introduced in 2019.
"This is to ensure that costs are fair, accurate, and reflective of the current climate," the regulator said.
"While costs associated with consumer debt have increased, suppliers have become increasingly efficient and resilient, and as a result operating costs have fallen - creating lasting savings for customers."
Ofgem says shopping around for a fixed tariff has the potential to save some consumers around £200 on traditional fixed tariffs compared to the upcoming price cap level.
Currently 35% of customers are on a fixed tariff, the regulator adds, up from just 15% a year ago when fewer offers were available.
Ofgem has announced a 7% reduction of the energy price cap for the period covering July to September 2025
The price cap – which sets a maximum rate per unit and standing charge that can be billed to customers for their energy use – will fall by £129 for an average household per year, or around £11 a month, over the three-month period of the price cap
For an average household paying by Direct Debit for dual fuel this equates to £1,720 per year This is £660 (28%) lower than the height of the energy crisis at the start of 2023 when the government implemented the energy price guarantee
But prices remain high with the upcoming level £152 (10%) higher than the same period last year Direct Debit and prepayment customers will see standing charges fall by around £19 per year on average
Ofgem says a recent fall in wholesale prices is the main driver of the reduction in its cap, accounting for around 90% of the fall.
The regulator added
The remainder is primarily due to changes to the operating cost allowances energy suppliers can recover.
Direct Debit and prepayment customers will see standing charges fall by around £19 per year on average.
Tim Jarvis, Director General of Markets at Ofgem, said:
A fall in the price cap will be welcome news for consumers, and reflects a reduction in the international price of wholesale gas. However, we’re acutely aware that prices remain high, and some continue to struggle with the cost of energy.
The first thing I want to remind people is that you don’t have to pay the price cap – there are better deals out there so it’s important to shop around, and talk to your existing supplier about the best deal they can offer you. And changing your payment method to direct debit or smart pay as you go can save you up to £136.
In the longer term, we need an energy system where prices are insulated from the volatile international gas market, and which ensures more stable prices and energy security. And we’re working closely with government to get the investment we need to reach our clean power and net zero targets as quickly as possible.
We’re also doing everything we can to support consumers today and pushing ahead with more changes to help consumers. This includes working on ways to support those trapped in energy debt and bringing in reforms to standing charge tariffs for this winter.
It has been confirmed that energy prices will drop by £129 a year for the average household.
It is the first decrease in the cap in a year.
Ofgem announced: "The quarterly energy price cap will change from £1,849 on 1 July 2025. The new price cap is £1,720. It's a cap on energy unit price plus standing charge, not a cap on total bills."
The new cap is set to be announced imminently at 7am.
We'll bring it to you as soon as we have it.
Money saving expert Martin Lewis posted yesterday on X: "Energy Price Cap announcement tomorrow likely to say it'll drop 6-8% on 1 July. Yet it'll still be a Pants Cap.
"At every point over the last year, you'd have been better off getting the cheapest 12 month fix."
He added: "Currently the cheapest fix is 18% less than the Price Cap, so very likely (if predictions are correct) to massively undercut the Cap."
Mr Lewis than told his followers that they can find their cheapest, depending on their use and region, via cheapenergyclub.com.
Energy Price Cap announcement tomorrow likely to say it'll drop 6 - 8% on 1 July. Yet it'll still be a Pants Cap.
At every point over the last year, you'd have been better off getting the cheapest 12mth fix (in my new infographic, the rainbow line is fixed price, then faint\u2026 pic.twitter.com/9Q05vuSEAm
\u2014 Martin Lewis (@MartinSLewis) May 22, 2025
Today's expected cap drop will come as a relief for households, who suffered through “awful April”.
Bill increases included Ofgem’s last 6.4% price cap increase.
Brits have also been hit with the biggest increase to water bills since at least February 1988, alongside large increases in terms of council tax, mobile and broadband tariffs and road tax.
Bill rises led to inflation jumping to 3.5% in April, up from 2.6% in March and the highest since January 2024.
The energy price cap was introduced by the Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.
Ofgem changes the price cap for households every three months, largely based on the cost of energy on wholesale markets.
It does not limit total bills, because householders still pay for the amount of energy they consume.
Good morning and welcome to our live coverage of the Ofgem price cap. An announcement is expected at 7am and the Daily Express team will be bringing you live updates and reaction throughout the morning.
Daily Express
