The energy price cap is a limit on what households pay for each individual unit of gas and electricity they consume. It is reviewed and can change every three months.
Ofgem, the energy regulator, sets the price cap, which affects around 22 million households in the UK.
Any events that affect the price of oil and gas, like the current conflict in the Middle East between Israel, the US and Iran, can impact the price cap. Experts warn that energy prices will likely rise again before the end of the year.
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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.
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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 20 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 11 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.
There is no price cap in Northern Ireland, instead there is a tariff review process. Households there are regulated by the Utility Regulator.
When is the next Ofgem energy price cap announcement?
The next UK energy price cap announcement by Ofgem is expected on or before 25 November 2026, covering the period from 1 January to 31 March 2027.
The next price gap periods after that are:
- 1 April – 30 June 2027: Announced on or before 23 February 2027 (assessment period: 18 November 2026 – 15 February 2027)
- 1 July – 30 September 2027: Announced by 26 May 2027 (assessment period: 16 February – 18 May 2027)
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.
