What does the energy price cap increase mean for your business?
The energy price cap will increase by about 2% from 1 October 2025. But what’s the price cap? Why’s it going up? And what does it mean for your business? Let us fill you in.
What’s the energy price cap?
The energy price cap is the maximum amount that energy companies can charge customers on prepayment or standard variable tariffs. Ofgem, the UK energy regulator, sets the level of the cap. It's reviewed every 3 months.
The level of the cap reflects:
- changes in wholesale energy costs
- government policy
- network charges
- the costs of running and maintaining prepayment meters.
You’ll often see the cap described as the typical yearly bill for an average household on a dual fuel tariff. But it isn’t a limit on what you’ll pay overall. It’s a cap on the unit rates and standing charges. So, your actual bill will depend on the amount of energy your household uses.
Why’s the price cap increasing?
The cost of wholesale energy has dipped in recent months, so why’s the price cap increasing? There are a few reasons.
- Warm Homes Discount expansion
This is a discount on winter energy bills for some low-income households or those on pension credits. The scheme knocks £150 off winter bills for eligible households. The price cap has been raised to cover rollout to an extra 2.7 million households this winter.
- Debt Allowance Scheme extension
This scheme covers the cost of energy debt customers accumulate. Its extension adds to bills.
- Wholesale market conditions
Energy market volatility eased this quarter. But it remains sensitive to shocks like US tariff changes or international strikes.
What does a price cap increase mean for your business?
An increase in the price cap increase won’t directly affect the amount your business pays for gas and electricity. This is because the cap only applies to domestic energy and not business energy prices.
But if the price cap is going up, this could signal that further energy price rises are on the way.
And there could be seasonal price rises as winter approaches. This is because supply and demand plays a part in energy prices. There's a big increase in demand during the colder and darker winter months.
Is your business energy contract renewal coming up in the next few months? Did you know you might be able to switch to a new deal up to 9 months before your current one expires?
Be proactive and speak to business energy experts at Bionic. They can instantly compare business energy quotes from a panel of energy suppliers and see how much you could save. Your Bionic comparison is free.
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