What is the energy price cap?

The energy price cap is a limit set by the energy regulator Ofgem on the maximum amount energy suppliers can charge customers per unit of gas and electricity. It applies to customers on standard variable tariffs — the default tariff most people end up on.

Importantly the price cap does not cap your total bill — it caps the unit rate you pay. If you use more energy you will still pay more, even with the cap in place.

How does the price cap work?

Ofgem sets a maximum unit rate that suppliers can charge for gas and electricity, as well as a maximum daily standing charge. These limits apply per fuel — so there are separate caps for gas and electricity.

The cap is expressed as an annual figure based on a typical household using a set amount of energy — currently defined as 2,700 kWh of electricity and 11,500 kWh of gas per year. This is what you see quoted in the news as “the price cap.”

If your household uses more or less than this amount your actual bill will differ from the headline cap figure.

Who sets the price cap?

The price cap is set by Ofgem — the Office of Gas and Electricity Markets — which is the independent regulator for the UK energy market. Ofgem was given the power to introduce the price cap by the government in 2019 to protect consumers from unfair pricing.

Ofgem calculates the cap based on the wholesale cost of energy, network costs, operating costs and a reasonable profit margin for suppliers. When wholesale energy prices rise, the cap tends to rise. When they fall, the cap falls.

When does the price cap change?

The price cap is reviewed and updated every three months — in January, April, July and October. Each change comes into effect at the start of the relevant quarter.

If you are on a standard variable tariff your bills will automatically change in line with each quarterly update — without you having to do anything.

Does the price cap apply to me?

The price cap applies to you if you are on a standard variable tariff — which is the default tariff most suppliers put customers on when their fixed deal ends.

It does not apply if you are on a fixed tariff — your rate is locked in regardless of what the cap does.

Can I pay less than the price cap?

Yes — and this is the most important thing to understand about the price cap. It is a maximum, not a target. Suppliers can and do charge less than the cap, and many fixed tariffs are available below the cap rate.

By comparing and switching to a cheaper fixed tariff you can often pay significantly less than the price cap rate — locking in a lower price for 12 or 24 months regardless of what the cap does.

This is why comparing energy deals regularly is so important — just because your supplier is charging within the cap does not mean you are on the best deal available.

Fixed tariff vs price cap — which is better?

This depends on where energy prices are heading. Here is a simple way to think about it:

The best approach is to compare what fixed deals are available right now against the current cap rate — if a fixed deal is cheaper than the cap you are on, it is almost always worth switching.