What this guide covers
This guide explains what the Ofgem energy price cap is, how it works, what it does and does not limit, and how it changes each quarter. It is educational information about UK energy regulation.
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What the price cap is
The Ofgem energy price cap is a regulatory limit on the maximum unit rates and standing charges that energy suppliers can apply to domestic customers on standard variable tariffs. It is set by Ofgem, the Office of Gas and Electricity Markets, which is the independent regulator for the UK energy sector.
The price cap was introduced in January 2019 following the Domestic Gas and Electricity (Tariff Cap) Act 2018. It was created to protect consumers from excessive pricing on standard variable tariffs, the default rate most households fall onto when a fixed deal ends or when they have not actively chosen a tariff.
What the price cap limits, and what it does not
This is the most commonly misunderstood aspect of the cap.
The price cap sets the maximum unit rate and standing charge per unit and per day. It does not set a maximum total bill.
A household that uses more energy than Ofgem's reference level will pay more than the headline cap figure. A household that uses less will pay less.
Ofgem publishes a headline annual figure based on typical domestic consumption, currently defined as 2,700 kWh of electricity and 11,500 kWh of gas per year, paying by direct debit. From 1 July 2026 this typical annual figure is £1,862. A household using significantly more energy, a large detached home with several people, for example, could pay considerably more than £1,862 even though they are on a price-capped tariff. An annual bill estimator based on your actual kWh usage gives a more personalised picture.
How the cap is calculated
Ofgem reviews the price cap quarterly. The calculation takes into account:
- Wholesale energy costs: the price at which suppliers buy gas and electricity on the wholesale markets. This is the largest component of the cap and the main driver of changes.
- Network costs: the charges suppliers pay to use the gas pipes and electricity wires that deliver energy to homes. These are regulated separately and change more slowly.
- Operating costs: an Ofgem-assessed allowance for reasonable supplier operating expenses.
- Smart meter costs: an allowance for the ongoing national smart meter rollout.
- Profit margin: a limited allowance for supplier return on investment, set by Ofgem at a level intended to allow viable but not excessive supplier margins.
- VAT: energy bills include VAT at 5%. The price cap is set inclusive of VAT.
When the cap changes
The price cap is reviewed four times per year. Ofgem announces each new level approximately six weeks before it takes effect.
The four periods and their effective dates:
Announcements typically happen in late November (for Q1), late February (for Q2), late May (for Q3), and late August (for Q4).
When the wholesale energy market is volatile, cap changes between quarters can be significant. The largest single quarterly rise occurred in April 2022 when the cap increased by £693 to £1,971. The highest level reached was Q1 2023 when the cap reached £3,280 before the government's Energy Price Guarantee moderated effective bills to £2,500.
- Q1: 1 January to 31 March
- Q2: 1 April to 30 June
- Q3: 1 July to 30 September
- Q4: 1 October to 31 December
The price cap and fixed tariffs
Fixed energy tariffs are not subject to the price cap in the same way as variable tariffs. A supplier can launch a fixed tariff above or below the current cap level, depending on what wholesale prices were when they designed the product.
During periods of high wholesale prices, fixed tariffs are typically priced above the cap because suppliers need to cover their higher forward purchasing costs. During periods of lower wholesale prices or when the cap is expected to rise, fixed tariffs are often priced below the cap, making switching worthwhile.
From 1 July 2026 the price cap will rise to £1,862. Fixed tariffs are currently available at rates below this level, meaning households on standard variable tariffs may be able to reduce their bills by switching to a fixed deal before the new cap takes effect.
For a detailed look at the July 2026 cap change and what it means for household bills, see our guide on the energy price cap July 2026.
The Energy Price Guarantee
Between October 2022 and April 2023, the UK government operated the Energy Price Guarantee (EPG) alongside the Ofgem price cap. The EPG capped the effective bill for a typical household at £2,500, even though the Ofgem price cap had risen to £3,549 in October 2022 and subsequently to £3,000 to £3,280.
The government absorbed the difference between the Ofgem cap and the £2,500 EPG ceiling. The EPG ended in April 2023, after which households paid the full Ofgem cap rate.
The price cap has fallen from its 2022 to 2023 peak but remains significantly above its 2019 level. The July 2026 cap of £1,862 is approximately 64% higher than the £1,137 cap in place when the scheme launched in January 2019.
Prepayment meter customers and the cap
Until April 2024, prepayment meter customers on standard variable tariffs typically paid slightly more than direct debit customers under the price cap. This was because the cap structure included a small premium for prepayment metering costs.
From 1 April 2024, Ofgem changed the rules so that prepayment customers are no longer charged more than direct debit customers on standard variable tariffs. The cap rates for prepayment and direct debit are now effectively equalised.
Regional variation under the cap
The price cap sets national average rates but actual unit rates and standing charges vary by region because gas and electricity distribution costs differ across the country's 14 network regions. The differences are relatively small, typically a few pence per kWh, but they mean your actual rate may be slightly above or below the headline national average figure.