U.K. energy regulator Ofgem cuts price cap by 7% to reflect lower wholesale costs

Published 23/05/2025, 07:40
© Reuters

Investing.com -- U.K. regulator Ofgem will lower its energy price cap for domestic customers by 7% starting July, in a move meant to reflect falling wholesale energy prices.

The new cap will be set at £1,720 per year for average energy usage—down £129 from the current April-to-June level. While this marks some relief for households, energy costs remain significantly above pre-crisis levels.

The decision comes at a important time for the U.K. government, which is under pressure to tackle persistent cost-of-living challenges. This week’s inflation data showed a larger-than-expected jump in April, adding to the urgency.

“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,” said Tim Jarvis, Director General of Markets at Ofgem.

The regulator is also working on reforms to ease the burden further. Starting July 1, standing charges for customers paying by direct debit or through prepayment meters will fall by around £19 on average.

Jarvis added that Ofgem is “doing everything we can to support consumers today and pushing ahead with more changes to help consumers,” including targeted support for those in energy debt.

More households are now locking into fixed tariffs, with 35% on such deals compared to just 15% a year ago. Switching could save around £200 annually versus the new cap, according to Ofgem data.

Despite the downward adjustment, the cap remains higher than its level last summer, and energy bills are still substantially elevated compared to before the 2021 crisis.

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