Energy Price Cap Falls by 7% – Relief Ahead for Direct Debit Customers in the UK
In a move that brings modest relief to millions of households, the UK’s energy regulator Ofgem has announced a 7% reduction in the energy price cap for the third quarter of 2025. This change directly affects households that pay for their energy via Direct Debit, with average bills projected to fall to £1,720 per year, down from £1,849.
What’s Changing?
From 1 July to 30 September 2025, the typical dual-fuel household will benefit from:
- A £129 annual saving (approx. £10.75/month)
- The lowest price cap level in over a year
- Continued benefits for those on Direct Debit versus prepayment or cash/cheque
The cap is determined based on wholesale energy prices, network costs, and supplier margins, and it acts as a safeguard for consumers on standard variable tariffs.
Why Direct Debit Matters
Households paying by Direct Debit continue to enjoy lower unit rates and standing charges than those on alternative payment methods. Ofgem considers this method to be more efficient for suppliers and incentivises its use through lower pricing structures.
However, recent data shows that Direct Debit users have not been immune to hardship. According to The Guardian, Direct Debit default rates reached 2.7% in April 2025, up from just 1.8% a year prior. This highlights a growing disconnect between pricing mechanisms and real affordability for lower-income households.
Direct Debit vs. Other Payment Types
| Payment Method | Typical Annual Bill (July–Sept 2025) |
| Direct Debit | £1,720 |
| Standard Credit | £1,828 |
| Prepayment Meter | £1,760 |
Ofgem attributes the price cut to lower wholesale gas and electricity prices, driven by increased LNG availability, a mild winter across Europe, and expanded domestic renewable production.
Long-Term Concerns
While the fall is welcome, analysts caution that prices are still elevated compared to pre-crisis levels. The £1,720 figure is still 10% higher than in July 2024. Citizens Advice warns that over 3 million households remain in energy debt, with £3.8 billion collectively owed to suppliers. For many, this small reprieve may not be enough.
“The price cap reduction is positive, but the scale of arrears and energy poverty means further policy support is needed,” said Gillian Cooper, Head of Energy Policy at Citizens Advice.
Should You Switch Tariffs?
With wholesale prices stabilising, fixed tariffs are re-emerging as a viable alternative. Providers like Octopus, EDF, and British Gas are offering one- or two-year fixed plans that may undercut the price cap over the medium term.
Consumers are urged to:
- Compare fixed deals before winter pricing rebounds
- Monitor their Direct Debit amounts for accuracy
- Regularly submit meter readings (or install smart meters)
What’s Next?
Ofgem will review the price cap again in September for the Q4 2025 period. Meanwhile, the government is under pressure to introduce more targeted energy subsidies, particularly for vulnerable groups.
For now, consumers on Direct Debit can expect a small but meaningful reduction in energy costs over the summer. Yet with volatility still looming in global energy markets, affordability challenges are far from over.
