UK households are gearing up for more financial strain as energy prices are set to increase once again starting January 2025. According to the energy regulator, Ofgem, the energy price cap will rise, leading to typical household energy costs reaching £1,738 per year. This marks another £21 increase from the previous price cap set just months earlier, which saw its own hike of £148. Not much easing appears on the horizon, with experts warning those higher costs could linger.
"Just as we’ve had the first cold snap of winter, we hear this news of another price increase. A warm home shouldn’t be considered luxury, but it’s fast becoming just another expense people are struggling to afford," said Alastair Douglas, CEO of TotallyMoney. The dire straits extend to about six million households currently living under fuel poverty.
The price hikes aren’t limited to standard variable tariffs. EDF Energy has also confirmed they will be increasing their prices from January 1, following Ofgem's announcement. The company admitted, "We know this isn’t ideal news for our customers” as they prepare for the second price hike within two months. They stated their variable tariffs would reflect Ofgem’s new price cap changes and urged those not already on fixed tariffs to explore options to secure lower rates.
For many households, switching to fixed tariffs may be a viable route to mitigate increasing bills. With roughly 80% of UK households currently on variable tariffs, there’s potential to lock in lower rates for up to 18 months. Martin Lewis, money-saving expert and founder of MoneySavingExpert, reiterated the benefits of securing fixed tariffs now before the January increase takes effect. He highlighted some options available at around 5% lower than the current price cap, which could lead to substantial savings as costs continue to rise.
"The cheapest fixed tariffs available right now are around 5% less than the current price cap, meaning locking one of these deals can help avoid future price increases. It’s all about providing some certainty over household budgeting amid unpredictable energy costs," Lewis explained.
With projections indicating overall bills might still be marginally higher throughout 2025, experts encourage households to take decisive action now before costs spiral even more. Switching is easy; the fear of being tied to higher payments when rates drop should be outweighed by the peace of mind knowing what your energy bill will be each month.
Government initiatives have been put forth to help ease the burden of rising energy prices, including cost-of-living payments aimed at providing some financial relief to the most impacted households. Yet sceptics argue these measures lack the necessary structure and sustainability for long-term support.
Katherine Tu, energy policy analyst at the Centre for Sustainable Energy, echoed this sentiment, stating: "While it's good to see short-term support from the government, we need more comprehensive planning to address the systemic issues driving these price hikes, including phasing out the VAT on energy bills or even investing in renewables to diversify our energy mix. Otherwise, we remain stuck with these untenable costs."
With winter upon us, many households find themselves between the rock of rising prices and the hard place of cold weather. Governments and utility companies now face mounting pressure to rethink strategies to alleviate energy costs and bring some relief to struggling families. Ideally, the call for real collaborative approaches would allow for more manageable energy pricing to prevent putting vulnerable segments of the population at even greater risk.
All eyes will remain on the energy sector as households digest the details of the looming changes. Each winter, the specter of high energy costs has loomed large, and as communities wrestle with maintaining warmth and utility amid persistent price skyrocketing, decisive action is more urgent than ever. Will these elements converge to elicit effective policy responses, or will the New Year usher households back to square one with reduced comfort but unchanged affordability?
