Katie Williams
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 July to the end of September, means the typical dual-fuel household using an average amount of energy and paying by direct debit will have an annual energy bill of £1,720, during this quarter.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
However, the price cap is set to rise by 2% in October. It means households will pay an average of £1,755 per year for their energy between 1 October and 31 December.
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 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 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 £1,720 per year for typical usage between July and September. From October, this figure will rise by 2% to £1,755.
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 (July to September) and the price cap for the final quarter (October to December).
| Header Cell - Column 0 | July-September price cap | October-December price cap |
|---|---|---|
Electricity unit cost | 25.73 pence per kWh | 26.35 pence per kWh |
Electricity standing charge | 51.37 pence per day | 53.68 pence per day |
Gas unit cost | 6.33 pence per kWh | 6.29 pence per kWh |
Gas standing charge | 29.82 pence per day | 34.03 pence per day |
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.
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.
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.
Will energy prices fall?
Forecasters believe that energy prices will fall at the start of 2026, the closest price cap period that has not had its prices confirmed.
Energy consultancy Cornwall Insight, who are well-renowned for their predictions, said on 27 August they expect the price cap to fall by 2.4% to around £1,712.20 per year in the first quarter of 2026.
Meanwhile, predictions by British Gas put the Q1 2026 price cap at £1,745, and others by EDF put it at £1,747.
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?
One major criticism of the energy price cap is how it sets standing charges. These fees are used by energy companies to pay for the critical infrastructure that powers our homes.
Standing charges mean you can pay hundreds of pounds a year before you’ve even used any gas or electricity. They also vary depending on where you live in the country.
Ofgem recently asked for the public's views on whether it should introduce new rules on standing charges.
If enacted, reforms could mean energy suppliers have to make a dual pricing offer – both with and without standing charges – to give customers greater choice.
The tariff without a standing charge would have a higher price for each unit of energy. Both tariffs would fall under the existing price cap system.
The plans have been criticised by some charities and energy groups for their complexity. They argue that standing charges won’t become more affordable, as they will just be shifted to another part of the energy bill.
A consultation on these changes by Ofgem concluded in March 2025, but no announcement has been made since.
-
Could your family be at risk of an unexpected tax bill? How to keep your loved ones in the loopMany families are out of the loop when it comes to planning the financial aspects of both retirement and inheritance
-
Rightmove: Glut of homes for sale in southern England drives asking price dropAsking prices are 0.1% lower than a year ago, according to the property website, driven by challenges in affordability-stretched London and the south
-
Winter Fuel Payment cut to hit ‘1.5 million’ pensioners - what support does your energy supplier offer?Advice The Winter Fuel Payment is being scrapped for most pensioners this year. But you may be able to access extra support from your energy supplier. Here’s what’s on offer.
-
Should you switch to a fixed energy tariff?As energy prices remain volatile and far above pre-2022 levels, is now the time to look for a fixed energy tariff? We check out the latest gas and electricity deals
-
Competition watchdog warns drivers still overcharged on fuel pricesAdvice The competition watchdog has revealed that motorists are still paying too much for fuel, a year after its initial investigation. How can you save on fuel costs?
-
Wood-burning stove vs central heating ‒ which is cheaper?Advice After energy costs increased again, we compare wood-burning stove vs central heating to find out which is cheaper for your home
-
Winter Fuel Payment – what is it and who can get it?Advice Pensioners with higher incomes will need to repay the Winter Fuel Payment this year, unless they opt out – and the deadline is fast approaching. We explain the eligibility rules and how the payment works
-
14 ways to save on your energy billAdvice As the weather gets colder and bills rise, we outline 14 ways you can save on your energy bills
-
Autumn Statement: Energy Price Guarantee extended – but will not be as generousNews Hunt will extend the Energy Price Guarantee, which was due to end in April 2023. But, the support will be significantly lower. Here’s everything you need to know.
-
What is the £400 energy grant and how will it be paid?News The government’s £400 energy grant is a discount applied to domestic energy bills in England, Scotland and Wales, with similar support for those in Northern Ireland. Here's how the grant will be paid.
