Price cap rise: should you fix your energy bills?

Today marks the introduction of a new higher energy “price cap” will increase the average household’s fuel bills to £1,849 a year.

This is an increase of 6.4pc, or £111 more a year, from January’s £1,738 price cap.

It is the third consecutive rise in gas and electricity charges and the first time that the April cap has risen above the January cap since quarterly updates began in 2022.

However, energy consultancy Cornwall Insight says there are more positive signs that from July bills are predicted to fall slightly to £1,712 a year for a typical consumer.

David Broom, clean heating expert at heat pump manufacturer Kensa, said: “This price cap rise is no joke for the millions of people waking up to higher energy bills. Even though households use less heating in the warmer months, gas standing charges will increase which households have to pay regardless of how much energy they use.

“This is another reminder that our energy pricing system needs urgent reform. Right now, it punishes consumers for things beyond their control.”

Mr Broom added that to reduce bills substantially and sustainably, Britain would need to reduce its reliance on imported gas and increase reliance on renewable energy.

Some 10 million pensioners no longer receive the annual winter fuel allowance after Chancellor Rachel Reeves announced the £200 payment (£300 for over-80s) would only be paid to those in receipt of pension credit. This has meant that despite bills falling year-on-year for most households, pensioners were the only group to see bills go up since last winter.

Here, The Telegraph covers 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.

• What are fixed energy tariffs?
• Is fixing energy worth it?
• Is now a good time to fix?
• What is the energy price cap?

What are fixed energy tariffs?

Fixed energy tariffs are deals offered by energy providers that last for a certain amount of time – usually 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.

Is fixing energy worth it?

Before the energy crisis, households were used to shopping around for competitive fixed-price deals.

However, the energy crisis upended the market, leaving variable rates governed by the price cap as the only viable option. Fixed rates became so expensive that providers stopped offering them altogether.

As wholesale prices have cooled, a number of fixed-rate deals have come on the market after years of being unavailable.

Fixes can come with extra costs

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 £75 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.

In February, consumer champion Martin Lewis said households could save hundreds of pounds by fixing their bill.

The MoneySavingExpert founder argued it was a “no-brainer” for those on a standard variable tariff to switch to a fixed rate as soon as possible.

Speaking on BBC Radio 4’s Today Programme, Mr Lewis said the cheapest fixed deals currently available were around 4pc cheaper than the current price cap, and would offer savings of up to 10pc less once Ofgem’s latest increase takes effect from April 1.

He said: “Based on the predictions at the moment, once it goes up in April, it ain’t coming back down to these levels for the next year.

“So as you can fix it currently at cheaper than the current cap, never mind before it goes up, it is a no-brainer to fix.”

Payment security can be valuable

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.

Ben Gallizzi, energy expert at comparison site USwitch, said: “The cheapest fixed deal on the market could save the average household around £244 a year compared to the April price cap. Right now, there are some of the biggest savings we have seen available since March 2024.

“The July price cap is currently predicted to be £1,712, which is £137 lower than the April price cap, but the top ten cheapest fixed deals offer even bigger savings than the predicted drop, so switching is still the best way to lock in lower rates.”

But there are questions about whether the price cap will even exit 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.”

Is now a good time to fix energy prices?

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 to July 2025 is up 6.4pc to £1,849, an additional £111 a year for the average household.

While analysts Cornwall Insight have suggested the price cap will fall marginally in July, unexpected global events can have a dramatic knock-on effect on prices.

What’s the difference between fixed and variable energy?

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.

What fixed energy deals are there?

Providers launch new deals regularly, so it’s worth checking in with comparison websites to see what the best value deal is for you.

Comparison site uSwitch currently lists several deals that are cheaper than the April price cap. They include OVO Energy’s extended fix, which lasts for 15 months and would save typical households £218 a year based on that cap.

Others offered by more niche suppliers such as Outfox the Market could save households up to £244 a year, according to uSwitch.

The table below shows the 10 cheapest fixed energy tariffs:

Other types of deals you might want to consider include:

One-year fixes

These are the most common deals. Comparison site uSwitch lists several deals cheaper than current rates.

Longer-term fixes

Several 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.

Price cap trackers

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.

Time of use tariffs

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.

What is the energy price cap?

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 of £1,849 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. From April, households will pay roughly 53.80p per day for electricity and 32.67p a day for gas.

How much more will I pay on my bills?

From April 1, the unit rate for electricity is 27.03p per kWh, and gas is 6.99p per kWh.

These are up from 24.86p and 6.34p respectively.

In short, it means your electrical appliances will now cost around 6.4pc more to run than they did between January and April 2025.

Try our calculator below to see how the monthly cost of your typical energy usage will change under the January price cap.

For cost changes on an annual basis, you can try the energy calculator from Citizens Advice. According to the figures, if you were to drink two cups of tea a day, and boiled a fresh kettle of water each time, you’d spend £24.64 a year under the April price cap.

Electric showers will cost 20p for every five minutes, or £1.42 a week, assuming one shower a day – £73.91 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 26p and an hour’s ironing costs 41p, according to Citizens Advice.