What is the Ofgem energy price cap and what does it mean for your bills?
Energy bills fell by 7% on 1 July when the new Ofgem price cap came into effect. What exactly is the cap?


Katie Williams
The regulator Ofgem sets the energy price cap every quarter, which dictates how much millions of customers pay for their gas and electricity.
The cap fell by 7% on 1 July, slightly easing the pain for customers on variable tariffs after three consecutive quarters of price hikes in October, January and April.
The latest forecast from consultancy Cornwall Insight, published on 1 July, suggests energy prices could fall again in October – this time by around 1%. A further “small fall” is also expected in January before prices pick up again in April.
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While prices have come down from their 2022 peak, they remain significantly higher than before the energy crisis. Geopolitical volatility in the Middle East could also throw forecasts for the rest of 2025 into disarray, if oil prices spike again in a more sustained way.
“While any reduction in energy bills is welcome, we must not let small fluctuations in the price cap mask the bigger picture,” said Craig Lowrey, principal consultant at Cornwall Insight.
“Households are still paying far more for their energy than they were before the pandemic, with the current outlook showing little prospect of a meaningful drop over the next few years.”
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 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 and network infrastructure maintenance costs are also used to set the rate.
The cap currently applies to around 35 million households in England, Wales and Scotland, according to Ofgem. Northern Ireland has a tariff review process instead of a price cap.
Under the current cap, which runs from July to September, the average home pays an annual figure of £1,720 for typical usage. Cornwall Insight currently expects this figure to fall to £1,698 when October’s price cap comes in. Ofgem won’t confirm the figure until later this summer (27 August latest).
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.
Here are the average unit rates per kilowatt hour (kWh) and daily standing charges under the current price cap (July to September). We have also included Cornwall Insight’s latest forecasts for October.
Row 0 - Cell 0 | July-September price cap | October-December price cap (forecast) |
Electricity unit cost | 25.73 pence per kWh | 26.17 pence per kWh |
Electricity standing charge | 51.37 pence per day | 51 pence per day |
Gas unit cost | 6.33 pence per kWh | 6.02 pence per kWh |
Gas standing charge | 29.82 pence per day | 30 pence per day |
Source: Ofgem (confirmed figures) and Cornwall Insight (forecasts). 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.
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 between January and March 2023, based on typical usage, the average household found itself paying closer to £2,500 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.
Since then, fixed-rate energy deals have returned to the market, giving customers more choice if they want to attempt to beat the price cap and get certainty over their payments going forward.
When is the next Ofgem energy price cap announcement?
Ofgem will announce the next energy price cap by 27 August. It will then come into play from 1 October to 31 December 2025.
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.
Will energy prices fall?
Cornwall Insight recently predicted that energy costs will fall by 1% in October, followed by another small drop in January. Prices are then expected to pick up slightly in April.
This is in spite of recent volatility in the oil price. The price of Brent crude spiked at the end of June when tensions between Israel and Iran overboiled, with the cost of a barrel of oil briefly hitting $81.
Tensions have since eased thanks to a ceasefire and oil prices have come back down.
“As the military tension has eased, the wholesale market has fallen – a fact which, coupled with updates to our forecasts of non-wholesale costs, is reflected in our latest outlook for the cap,” Cornwall Insight said.
The consultancy expects the typical annual bill to be around £1,698 when October’s price cap is set – although it points out that “significant uncertainty” remains, with just under two months until the final figure is announced.
A separate forecast from EDF Energy puts the October price cap at £1,718 (based on typical usage), just £2 lower than the July cap. British Gas is forecasting a slight increase to £1,730.
These forecasts are regularly updated by the energy suppliers, with the latest figures from EDF and British Gas published on 1 July and 30 June respectively.
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Ruth is an award-winning financial journalist with more than 15 years' experience of working on national newspapers, websites and specialist magazines.
She is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times.
A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service.
Outside of work, she is a mum to two young children, while also serving as a magistrate and an NHS volunteer.
- Katie WilliamsStaff Writer
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