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Ofgem has announced the new quarterly utility price cap, effective from October 2025. The CPI mathematics mean that small price rise will have downward impact on annual inflation.
*From Q3 2023 typical domestic consumption values (TDCVs) used in calculating the price cap were reduced by Ofgem from 12,000KWh to 11,500KWh for gas and 2,900KWh to 2,700KWh for electricity.
The announcement of the new Ofgem price cap (dark blue bar) of £1,755 for the quarter starting in October 2025 represents an increase of £35 (2.0%) from today’s (Q3) level of £1,720, based on Ofgem’s average usage data. The increase is double that projected by Cornwall Insight on 18 August. Remember that, although all the publicity is around the total figure, Ofgem does not cap individual bills, only utility companies’ regional rates and standing charges.
Last April’s sharp jump in inflation numbers (please see our earlier Bulletin) was in part driven higher by the Ofgem price cap which took effect in that month. However, a rise in the cap in October 2025 will not have the same effect because the increase between Q3 2024 and Q4 2024 was significantly higher. The mathematics behind the calculation is:
For July 2025 to September 2025 the annual price cap inflation in the CPI calculation is 9.7% (a rise from £1,568 in Q3 2024 to £1,720 in Q3 2025).
For October 2025 to December 2025 the annual price cap inflation in the CPI calculation is 2.2% (a rise from £1,717 in Q4 2024 to £1,755 in Q4 2025).
The net effect is a fall in the October CPI by about 25 basis points.
Ironically, about half of the increase in the cap is attributable to “Government social and environmental schemes”, notably an expansion to an additional 2.7m vulnerable households of the Warm Home Discount (WHD) scheme announced in June 2025.
Looking ahead to the Q1 (January 2026) Ofgem fix, this looks set to make no impact on the CPI. Cornwall Insight is currently projecting “a small drop”. It would only take a £17 decrease (to £1,738) to mean the cap was unchanged over the year.
Source: Techlink Professional
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