The energy regulator, Ofgem, sets the energy price cap every quarter, which then dictates how much you pay for gas and electricity.
But what is the energy price cap and how does it impact your gas and electricity bill?
Introduced in 2019, the energy price cap was brought in to set a limit on how much suppliers can charge customers on standard variable tariffs for energy. It was a protective measure to ensure households do not get ripped off with extortionate prices.
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On 1 October, the latest energy price cap pushed energy bills up 10% (£12.50 a month, on average) due to a rise in wholesale prices. Costs are currently expected to rise again January 2025 when another cap is set. The price cap for January to March will be announced on 22 November.
What is the Ofgem energy price cap?
The Ofgem energy price cap sets the maximum unit rates energy firms can charge for standard variable rate tariffs. It caps the price per kilowatt hour (kWh) for gas and electricity, along with the standing charges for each fuel. It is not a cap on your total energy bill. What you'll pay is mostly determined by your energy usage.
It is set every three months, and is mostly based on wholesale prices. Supplier profit margins and network infrastructure maintenance costs are also used to set the rate.
The cap currently applies to around 27 million households in England, Wales and Scotland. Northern Ireland has a tariff review process instead of a price cap. Under the current cap, the average home pays an annual figure of £1,717 (£143 a month). This is 10% up on the July price cap, which came in at £1,568 a year (£130 a month).
These averages are illustrative. The only figures that really count are the 10% figure and the cap's unit rates. The latter can vary depending on where you live in the country, as each region has a private operator which runs the mains networks. For the 1 October to 31 December cap, the average unit rates are:
| Fuel | Price per kilowatt hour (kWh) | Standing charge (per day) |
| Gas | 6.24p | 31.66p |
| Electricity | 24.50p | 60.99p |
Please be aware that these Ofgem figures are national averages, with your actual unit rates depending on where in the UK you live.
One major criticism of the cap is how it sets standing charges. These fees are used by energy companies to pay for the critical infrastructure that powers our homes. But, they mean you pay around £334 a year before you’ve even used any gas or electricity. Ofgem recently conducted a consultation into whether this system of charges should be scrapped, with an announcement due imminently.
The energy price cap was initially put in place to protect vulnerable households. Before the energy crisis, you would only drop onto a variable tariff if you let your fixed deal expire and didn't switch to a new deal. To prevent consumers in this situation from being overcharged, Theresa May's government brought in the cap.
However, when the energy crisis hit in late 2021, almost all fixed deals disappeared from the market. This was down to surging wholesale prices, which meant dozens of providers went bust, including Bulb Energy. The fixes that were on offer tended to be much more expensive than variable rate tariffs.
So, most households dropped onto variable rates (and therefore, the price cap) when their fixes expired. The only time people didn't was between October 2022 and June 2023, when the government operated the Energy Price Guarantee (EPG).
The EPG acted as a safety net. It effectively subsidised suppliers so that consumers did not see their bills rocket when the Ofgem price cap soared in the wake of Russia's invasion of Ukraine. Once wholesale costs fell, and the Ofgem cap went below the rate of the EPG in July 2023, households once again found themselves on the price cap rate.
Since then, fixed rate deals have returned - although signing up to one is currently a risk given prices could fall in 2025. Energy consultancy Cornwall Insight says it could be the 2030s before energy bills fall back to where they were pre-Covid.
When is the next Ofgem energy price cap announcement?
The next big date for your diary is 22 November. On this day, we will find out what bills will look like between 1 January and 31 March 2025. The figure the regulator announces will be based on an assessment period for wholesale prices that runs from 18 August until 18 November 2024.
The next cap after the January one (running from April to June 2025) will be announced on or just before 25 February 2025.
Will energy prices fall?
Households have been hoping energy prices will fall in 2025. Cornwall Insight, an energy consultancy, expects the cap will rise by 1% in January 2025 to reach £1,736 a year. This adds around £19 a year to bills.
It then expects prices will remain relatively flat until 2028, but warned it could be several years before energy bills go back to where they were before 2020.
Ofgem is currently consulting on the future of the energy price cap. The energy regulator has said it does not believe it is fit for purpose in the net zero age.
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