Ofgem Energy Price Cap Rise
Ofgem’s October 2025 domestic energy price cap has now risen by 2%, moving from £1,568 to £1,599 a year for a typical household. While the cap applies only to domestic consumers, the ripple effects are being felt across wholesale markets and businesses need to pay attention.
This increase may look modest, but it reinforces a stubborn trend: prices remain volatile, costs are still elevated compared to pre-crisis levels, and further government-mandated charges are on the horizon.
Why the Cap Matters for Businesses
- Market Sentiment
The domestic price cap is closely watched by wholesale markets, investors, and suppliers. Even a small rise signals that underlying costs remain stubbornly high, particularly as winter approaches. Businesses can expect suppliers to reflect this in their forward pricing. - Supplier Cost Recovery
Energy suppliers serving both domestic and business customers may seek to recover costs across their portfolios. A higher domestic cap can feed into business pricing models, especially for SMEs on deemed or out-of-contract rates. - Consumer Pressure and Demand
With households paying more, consumer spending power will tighten. For energy-intensive sectors like hospitality and retail, reduced discretionary spend could add to pressure just as operational costs rise.
The Bigger Picture
- Volatility remains: A 2% rise may look modest, but it underlines that prices are not returning to pre-crisis norms any time soon.
- Policy costs rising: Alongside the new RAB levy due in November 2025, businesses will see a greater share of their bills made up of government-mandated charges.
- Domestic Tariff Reform: Ofgem has also confirmed plans for suppliers to offer at least one lower standing charge tariff for households, by January 2026. While this change won’t apply to business contracts, it shows the regulators focus on how fixed costs are shared – something that could influence future commercial policy too.
- Winter demand: With colder months ahead, demand-side pressure is likely to keep wholesale markets firm.
How Businesses Should Respond
- Review contracts now: Locking in favourable rates before winter peaks could avoid higher costs later.
- Audit current bills: Ensure levies and charges are being passed through correctly -errors are common.
- Plan for volatility: Build energy risk management into board discussions, treating energy as a strategic issue, not just an overhead.
- Look at efficiency: Reducing demand through smarter controls, insulation, or on-site generation helps offset market volatility.
The Resolve View
The October price cap rise is a clear reminder that the UK energy market remains fragile. For businesses, the cap itself doesn’t apply but the sentiment it creates, and the pressure it adds to suppliers, should inform procurement strategy.
At Resolve, we help businesses navigate these changes with clear, tailored advice. Whether it’s contract timing, risk management, or efficiency planning, our role is to make sure you stay in control of your costs.
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