What is the Ofgem energy price cap and what does it mean for your bills?

Energy prices for millions of consumers in the UK are dictated by the energy price cap, which sets the maximum that energy suppliers can charge you for one unit of energy.

The price cap is set by the energy regulator Ofgem and is reviewed every three months.

The current price cap, in place from 1 October to the end of December, means the typical dual-fuel household using an average amount of energy and paying by direct debit will have an annual energy bill of £1,755, during this quarter.

This represents a 2% rise from the previous price cap which lasted from 1 July to 30 September.

While prices today are far below the level they were in the aftermath of the 2022 energy crisis, energy is still far more expensive than it was before the pandemic.

We look at what the Ofgem energy price cap is, and what it means for your finances.

What is the Ofgem energy price cap?

Introduced in 2019, the energy price cap was brought in to set a limit on how much suppliers could charge customers on standard variable tariffs (SVT) for energy. It is a protective measure which aims to shield households from extortionate prices.

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.

The cap is set every three months, mostly based on wholesale prices. Supplier profit margins, policy costs, and network infrastructure maintenance are also used to set the rate.

Around 34 million households in England, Wales and Scotland are on Standard Variable Tariffs (SVT), according to the latest data from Ofgem in August, meaning the amount they pay for their energy goes up and down with the price cap.

The remaining 20 million households are on fixed rate tariffs, where you lock in to pay a certain amount for your energy for a set period of time (usually 12 to 18 months) regardless of whether the price cap goes up or down.

We explore whether you should switch to a fixed rate tariff in a separate article.

Under the current cap, the average household on a dual-fuel SVT, paying by direct debit, will be £1,755 per year for typical usage between October and December.

This typical bill figure is purely illustrative. The amount you pay will vary by usage. It will also depend on where you live in the country, as each region has a private operator that runs the mains networks.

There is no price cap in Northern Ireland, instead there is a tariff review process.

Here are the average unit rates per kilowatt hour (kWh) and daily standing charges under the current price cap (October to December).

Source: Ofgem (confirmed figures). All figures are national averages. Your actual unit rates depend on where in the UK you live. You can find out more about prices in your area on the energy regulator's website.

When is the next Ofgem energy price cap announcement?

Ofgem will announce the next energy price cap for the first quarter of 2026 by 25 November 2025.

The history of the price cap

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 in 2019.

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, Zog Energy and Pure Planet.

The fixes that were on offer at this time tended to be much more expensive than variable rate tariffs. As a result, most households dropped onto variable rates and were protected by the cap when their fixes expired.

Things changed again between October 2022 and June 2023, when the government introduced the Energy Price Guarantee (EPG) as a safety net at the height of the energy crisis.

This effectively subsidised suppliers, putting a ceiling on how high charges could go. While the Ofgem price cap soared to a peak of £4,059 per year between January and March 2023, based on typical usage, the average household found itself paying closer to £2,500 per year thanks to the EPG.

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.

Will energy prices fall?

While the actual price cap for that period is yet to be announced by Ofgem, forecasters believe that energy prices will fall at the start of 2026.

Energy consultancy Cornwall Insight said on 30 September it expects the price cap to fall by 1.7% to around £1,725 per year in the first quarter of 2026.

British Gas and EDF put the Q1 2026 price cap at the £1,750 mark.

As the energy market is very exposed to external economic shocks, it is very difficult to accurately predict where prices will go, especially so far off the date of a price cap announcement, so it is best to take these predictions with a pinch of salt.

We go into more detail over whether gas and electricity bills will fall in a separate article.

What’s happening with standing charges?

Following a consultation that started in February, Ofgem is looking to shake up the energy tariffs available to bill payers who want lower standing charges.

From next year, consumers will be given the choice of using an energy tariff with lower standing charges, with the trade-off of paying higher unit rates for their energy.

The energy regulator has warned the change is unlikely to bring about overall savings as the costs are simply being moved to a different part of the bill.

Every major energy provider will be forced to provide a tariff with lower standing charges by the end of January 2026. Ofgem recommended households should “consider their circumstances and seek advice from their supplier or consumer groups” to see if switching to a new tariff is best for them.