Forecast of energy prices for 2025: Will gas and electricity prices decline?

New Year's Day saw a 12 percent increase in UK energy prices, and an additional increase is anticipated in April

In 2025, will they start to decline or will they keep rising?

Since the most recent energy price cap went into effect on January 1st, energy bills have increased by an average of 21 percent annually.

Although the precise amount you pay will depend on your usage, the average annual bill increased by 1.2 percent to 1,738.

The increase comes after wholesale prices spiked by 10% in October. After losing their Winter Fuel Payment last year, many pensioners will be especially affected by the increased energy bills.

There may be more bad news ahead, according to the most recent energy price projections, as bills are expected to rise even more in April.

Approximately 27 million households with variable energy tariffs are subject to the price cap. Every three months, the energy regulator Ofgem updates it.

Depending on what happens to the price cap in 2025, customers may choose to remove their fixed energy deals in an effort to protect themselves from price increases.

We examine the most recent energy price projections to see where bills are likely to go this year.

Will the cost of energy decrease in 2025?

Prior to the implementation of the April to June price cap in April 2025, energy consultancy Cornwall Insight, which is highly regarded for its precise forecasts, estimated that bills would decrease by 1 point 4 percent.

But then it changed its prediction for energy prices to a 2 point 7 percent increase. It has now released its final price cap forecast for April and, in a setback for consumers, has raised the hike to 5%. Accordingly, the average annual bill's April price cap will rise by 85 to 1,823.

This would be the third time in a row that the price cap has increased. On February 25, Ofgem will make the April cap announcement.

"As the combination of colder weather and reduced renewables production saw gas storage levels fall across Europe, resulting in wholesale prices rising sharply," the consultancy claims that its cap forecast has increased in recent weeks.

"Households have been hit hard over the past few months, and the pressure is not letting up with bills set to rise for a third consecutive time," says Dr. Craig Lowrey, principal consultant at Cornwall Insight.

"The market is more volatile than it has been in a long time, and households throughout Europe are suffering from the cold weather and low gas storage levels, even though we are not witnessing a return to the height of the energy crisis.

Energy companies are also predicting a rise. For the April to June price cap, EDF Energy projects a 7% increase to 1,859 per year. The energy price cap for British Gas is expected to increase by 5%, reaching 1,830 E. Next is forecasting a 1,838 cap.

In the second half of this year, Cornwall Insight predicts that energy bills will decrease in July and increase in October, though these projections are subject to change.

Looking ahead, the announcement of negotiations between Russian and American officials to end the conflict in Ukraine has caused gas prices to drop. Although this has happened too late to impact the April cap, the effects are already being felt starting in July 2025, with prices predicted to drop a little in the third quarter of 2025 before increasing once more in October, according to the consultancy.

Last summer, the government introduced Great British Energy in an effort to lessen the UK's dependency on foreign nations for its energy supply, but if the project is successful, it will be a while before customers notice the impact on their monthly bills.

According to a survey, the majority of people are just as concerned about paying their energy bills now as they were during the previous winter. Research firm Strand Partners reports that 88% of people are just as worried as they were a year ago, if not more so.

What does the future hold for energy prices?

Energy bills might not return to their pre-2020 levels for a number of years, according to Cornwall Insight.

According to its forecast, prices will stay largely unchanged for the next three years before starting to decline starting in 2028. It anticipates that increased output of renewable energy will better support better gas supplies by that time.

Even by 2031, wholesale prices, according to the consultancy, are probably going to be significantly higher than the averages of the previous ten years.

They may still be over 10 percent higher than the most costly energy prices from the late 2010s, even after accounting for inflation.

Cornwall Insight attributes this to Europe's ongoing dependence on gas imports.

Do I need to adjust my energy?

The competitiveness of fixed energy deals has increased in comparison to the Ofgem energy price cap. Right now, your attitude toward risk determines how you should approach the market.

Should prices decline in July and October, fixing now could result in rates that are no longer competitive. However, if prices keep going up, fixing could have saved you money.

If cost certainty is important to you, choosing a fixed deal will ensure that you are aware of your expenses for the upcoming year. Therefore, BFIA advises evaluating the available options and determining whether fixing fits your budget.

How much does energy cost now?

The unit price that suppliers can charge customers on a variable tariff is determined by the current Ofgem energy price cap, which is in effect from January 1, 2025, to March 31, 2025.

It is set at 1,738 annually for a typical household that pays with a direct debit and uses gas and electricity. This represents a 1.2 percent increase over the cap that applied from October 1, 2024, to December 31, 2024 (1,717).

The average use for a normal customer is reflected in this annual bill. You will therefore pay more than this if you use more gas and/or electricity, possibly as a result of having larger-than-normal appliances or a larger-than-average home.

The average unit rates per kWh and daily standing charges (which differ by region) for Direct Debit bill-payers under the current price cap are as follows.

Electricity: unit rate: 24:86p per kWh, standing charge: 60:97p per day; gas: unit rate: 6:34p per kWh, standing charge: 31:65p per day.

How to reduce energy costs.

In our post examining 14 strategies to lower your energy expenses, we have compiled some of the best advice to help you maintain low energy bills.

We compare wood burning stoves versus central heating, heated airers versus tumble dryers, and radiators versus electric heaters to find the best ways to save money and increase energy efficiency.

How to obtain assistance for paying your energy costs.

Don't put your head in the sand and accrue a large debt if you're having trouble paying your energy bills.

Your energy provider might be able to help. There are hardship grants available to certain suppliers. Among them are British Gas's British Gas Energy Trust and Octopus Energy's Octo Assist.

You might qualify for a repayment holiday. Here, you request that your supplier temporarily suspend your repayments in order to give you some breathing room.

Agreeing to a reasonable payment schedule is an additional choice. You'll make fixed payments over a predetermined length of time to pay off your debt plus a portion for your ongoing expenses.

Through the Fuel Direct Scheme, you may be eligible to deduct your debt directly from your benefits if you are receiving them. Citizens Advice states that the Fuel Direct Scheme is typically preferable to obtaining a prepayment meter and may be a good choice if you are unable to come to an agreement on a repayment plan.