What is the Ofgem energy price cap and what does it mean for your bills?
The Ofgem energy price cap is reviewed every three months. What is its current level and how does it affect bills?
The price cap is a limit on what households for each individual unit of energy they consume. It is reviewed and can change every three months.
Ofgem, the energy regulator, sets the price cap, which affects around 33 million households in the UK.
The current cap is in place from 1 April to 30 June and sees the typical household on a dual-fuel tariff paying £1,641 a year, by direct debit.
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However, the price of energy is set to soar in July, when the average annual energy bill will rise by £221 (13%) to £1,862 for a household on a dual-fuel tariff that pays by direct debit.
The war in Iran has led to a surge in the price of oil and wholesale energy, consequently pushing prices up.
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.
While the price cap is often expressed as an average annual bill for a household on a dual-fuel tariff, this is purely illustrative.
What you will actually pay depends on how much energy you consume and where in the country you live, as each region has its own unit rates and standing charges.
The cap is reviewed every quarter, and is mostly based on the average price of wholesale energy during a three month observation window. Supplier profit margins, policy costs, and network infrastructure maintenance are also used to set the rate.
Around 33 million households in England, Wales and Scotland are on Standard Variable Tariffs (SVT), according to the latest data from Ofgem, meaning the amount they pay for their energy goes up and down with the price cap.
The remaining 21 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.
There is no price cap in Northern Ireland, instead there is a tariff review process. Households there are regulated by the Utility Regulator.
Here are the average unit rates per kilowatt hour (kWh) and daily standing charges under the current energy price cap (April to June) and the next price cap (July to September).
| Header Cell - Column 0 | April to June cap | July to September cap |
|---|---|---|
Electricity unit cost | 24.67 pence per kWh | 26.11 pence per kWh |
Electricity standing charge | 57.21 pence per day | 57.19 pence per day |
Gas unit cost | 5.74 pence per kWh | 7.33 pence per kWh |
Gas standing charge | 29.09 pence per day | 29.04 pence per day |
Source: Ofgem. 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?
The next energy price cap will come into effect on 1 July and last until 30 September. It was announced on 27 May.
The final price cap of the year, which will cover the period between October and December, will be announced by Ofgem by 26 August.
Energy consultancy Cornwall Insight, who are well-regarded for the accuracy of their price cap predictions, expect the October price cap will rise to £1,899 per year for a typical dual‑fuel household.
That is a rise of around 2%, or £37, when compared to the current July price cap.
We go into more detail on the gas and electricity price forecast in a separate article.
Why was the price cap introduced?
The energy price cap was initially put in place to protect vulnerable households. Before the 2021 energy crisis, you would typically 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.
