Will gas and electricity bills fall? 2025 energy price forecast

Energy bills are set to slide this summer in welcome news for UK households.

The price cap will be set at £1,720 per year from 1 July – a 7% drop compared to the previous cap of £1,849.

These figures refer to the typical annual bill for a household paying by direct debit. Those who use more energy will pay more, as the price cap is based on the maximum unit price, not your total bill.

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The price cap is set on a quarterly basis by the regulator. Around 35 million households on variable tariffs will see their bills drop from July. Those on a fixed energy deal will not be impacted by changes to the cap.

Prices are expected to remain stable later in the year, as we head into autumn. Consultancy Cornwall Insight currently expects the October price cap to show “little change” compared to July.

That said, there are still a number of variables at play. The consultancy points out that changing weather patterns, the relaxation of EU gas storage rules, the war in Ukraine and ongoing tariff uncertainty could all alter its forecast.

It is also important to put the latest price changes into context.

“While it’s important to celebrate the small wins, the energy market remains unpredictable,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.

“We know recent declines in wholesale prices have helped bring the cap down, but global events – from geopolitical negotiations to shifts in trade and weather – can quickly reverse that trend.

“Plus, even with the cap coming down, bills are still higher than what we used to consider ‘normal’, so support is still very much needed. The outlook may be improving, but we’re not out of the woods yet, and energy affordability must remain a priority.”

Israel’s strikes on Iran on 13 June led the price of crude oil to surge in the aftermath – immediately the cost of a barrel of oil jumped from $67.26 to around $71.58 (up around 7%), before falling to $69.52 by 4pm on 13 June.

A rise in the price of oil has implications for the price of energy – there was a similar jump when Russia first invaded Ukraine in 2022, though it was much more pronounced.

The price of gas also jumped after news of Israel striking Iran’s nuclear sites broke in the small hours of 13 June, though far less than oil.

If the turbulence in the oil market and Israel’s conflict with Iran is prolonged, it becomes more likely that energy bills will increase, though consumers will likely feel the impact of the conflict on petrol prices sooner.

What do falling energy prices mean for you?

It isn’t bills that are capped, but unit costs and standing charges. Households that use more energy could end up paying significantly more than the £1,720 figure quoted by Ofgem, the regulator, in July’s price cap announcement.

The below table summarises how unit costs and standing charges have changed over the course of this year. It also includes the latest forecast from Cornwall Insight for October.

^{Source: Ofgem (confirmed figures) and Cornwall Insight (October forecast). Typical annual bill based on customers paying by direct debit. Latest Cornwall Insight predictions as of 23 May.}

Lowrey points out that lower prices in the warmer months are helpful, but become even more valuable as the weather starts to cool and the heating goes on.

While prices aren’t currently expected to fall in October, a minimal increase of just 0.4% versus July’s cap (based on the latest predictions) will come as a relief.

“With energy use typically rising as we head into winter, any drop in bills later in the year would be especially valuable for families trying to manage the high costs in the lead up to the Christmas period,” he added.

October’s price cap won’t be announced until 27 August, so plenty could change between now and then.

What’s happening with standing charges?

Ofgem is looking to change the way standing charges work, which could mean energy firms are forced to make a dual-pricing offer.

If the proposal is implemented, every energy supplier will need to offer energy tariffs with low or no standing charges. This would give customers greater choice and could reduce energy bills for some households.

Many billpayers consider standing charges to be unfair as they have no control over how much is charged.

In a consultation conducted earlier this year, Ofgem looked at a system of two tariffs – one with a standing charge and one without. The one without a standing charge would have a higher price for each unit of energy. Both tariffs would fall under the existing price cap system.

The consultation closed on 21 March and a decision has not yet been announced.

The plans have been criticised by some charities and energy groups for their complexity. They say vulnerable customers could make the wrong choice, unwittingly paying more for their gas and electricity.

Some high energy users, including those who rely on medical equipment, could also suffer if these costs were added to the unit rate for everyone.

Critics also argue that standing charges won’t become more affordable, they will simply be shifted to another part of the energy bill.

Should I fix my energy?

Fixed energy deals currently look competitive compared to the Ofgem energy price cap. Some customers could save £200 annually by shopping around for a fixed tariff, the regulator said.

A lot depends on where prices are heading next and your attitude to risk.

Fixing now risks locking in rates that could become uncompetitive if prices drop in October and beyond. If prices continue to rise, you could have saved money by fixing.

If you value cost certainty, opting for a fixed deal means you will know exactly what your outgoings will be for the next 12 months. MoneyWeek suggests weighing up the options on the market and assessing whether fixing meets your financial needs.

If you opt for a fixed deal, pay close attention to any exit charges that come with leaving the tariff early.

“Some providers offer deals with no exit fees, particularly for existing customers, so if prices do fall at a later date, they aren’t trapped,” said Alice Haine, personal finance analyst at investment platform Bestinvest. These tariffs can sometimes be more expensive, though.

Haine’s advice is to “consider all options, including cheaper variable tariffs, a tracker product that changes daily based on wholesale cost, or time-of-use tariffs that can benefit people charging electric vehicles overnight or those that want to take better advantage of off-peak rates”.

How to keep energy bills low

To help you keep energy bills low, we have gathered some top tips in our article looking at 14 ways to reduce your energy costs.

If you're interested in the best ways to improve your energy efficiency and reduce costs, we explore: radiators versus electric heaters, heated airers versus tumble dryers, and wood burning stoves versus central heating.

How to get help with paying your energy bills

If you’re struggling to afford your energy bills, don’t bury your head in the sand and build up large debts.

Your energy supplier may offer support, for example, some suppliers have hardship grants. Octopus Energy has Octo Assist and British Gas has the British Gas Energy Trust.

You may be able to get a repayment holiday. This is where you ask your supplier to pause your repayments for a short amount of time to give you some breathing space.

Another option is to agree to an affordable payment plan. You will pay fixed amounts over a set period of time, which will cover what you owe plus an amount for your current use.

If you are on benefits, you might be able to repay your debt directly from your benefits through the Fuel Direct Scheme.

According to Citizens Advice, the Fuel Direct Scheme can be a good option if you can’t agree on a plan to pay back your debt, and it’s usually better than getting a prepayment meter.