Energy Price Cap Explained

At a glance

  • Ofgem’s price cap limits pricing on eligible household default tariffs in England, Scotland and Wales.
  • The headline annual figure is an illustration for specified consumption, not a ceiling on your bill.
  • Your cost depends on consumption, tariff rates, standing charges, region and payment method.
  • Fixed tariffs, business contracts and Northern Ireland have different arrangements. Check current rates with Ofgem rather than relying on an old headline.

The energy price cap is often reported as one annual amount. That can give the impression that a household cannot be charged more. In reality, it is a protection affecting tariff prices; the amount you pay still depends on the energy you use.

On this page

Who the cap protects

The domestic cap applies to eligible default tariffs, including standard variable tariffs, in Great Britain. These are household arrangements, not ordinary business energy contracts.

A fixed tariff is not directly repriced each quarter by the domestic cap. Its prices and any permitted changes depend on the agreement. Heat networks, heating oil and other arrangements should not be assumed to fall within the same protection.

Ofgem explains the cap’s coverage and calculation. In Northern Ireland, energy price regulation is overseen by the Utility Regulator under a different system. Check the guidance for the place and type of supply concerned.

What the headline annual amount means

The reported annual figure uses specified typical consumption and an assumed payment method. It makes different cap periods easier to compare on a consistent basis.

It is not a personalised forecast. A large home with high heating demand can pay more; a low-use household can pay less. It is also not a promise that the quoted prices will remain unchanged for the next 12 months.

If a headline describes a quarterly cap period using an annualised figure, do not divide it by four and assume that is your winter bill. Energy use is seasonal and your own rates and consumption can differ from the assumptions.

The calculation behind your own bill

For a simple tariff, calculate consumption charges from kWh multiplied by the applicable unit rate. Add the standing charge for each day supplied, then account for taxes, credits and other applicable items on a consistent basis.

For illustration, 3,000 kWh of electricity at 25p/kWh costs £750 in consumption charges. A 50p daily standing charge adds £182.50 over 365 days. Together that is £932.50 before any tax or adjustment not already included in those example prices.

Change the consumption and the total changes. Change the tariff prices and it changes again. Neither calculation uses one universal maximum household bill.

Gas needs its own consumption, unit rate and daily charge. Multi-rate electricity requires the consumption at each applicable price. Read our bill guide for examples and account-balance checks.

Why capped prices differ

There is not one identical national unit rate for every household. Region, payment method, fuel and meter arrangement affect the relevant rates. Supplier tariff structures can also differ within the applicable rules.

Use Ofgem’s current regional rates and standing charges to check the appropriate period and payment method. National averages are useful context but may not match your bill exactly.

When comparing figures, check their tax basis. Published rates and taxes can change, and a comparison between VAT-inclusive and VAT-exclusive figures is misleading.

Why the cap moves

The cap calculation includes allowances for costs such as wholesale energy, networks, supplier operations and policy obligations. These costs do not all move together.

Wholesale prices are important, but a fall in a market price today does not mean a bill must fall by the same percentage tomorrow. The cap uses defined calculation periods and assumptions; suppliers also buy energy in advance. Ofgem publishes the cap levels and supporting documents.

The overall change in a headline annual figure does not mean gas prices, electricity prices and standing charges each changed by that percentage. Compare the actual components.

When the cap changes

The current timetable uses quarterly periods starting on 1 January, 1 April, 1 July and 1 October. The next level is normally announced before the new period begins.

An announcement date and an effective date are different. If a rate change occurs during your billing period, check the dates and prices applied to each part. Our quarterly price-cap guide explains a simple checking routine.

Fixed tariffs and choosing how to pay

A fixed deal may be above or below the variable prices available at a particular time. That alone does not establish which will cost less over its whole term: future variable prices are uncertain, and exit fees or conditions may matter.

Compare offers using your expected consumption, all relevant prices, tariff duration and fees. Consider whether a tariff requires smart-meter readings or changes to when you use energy. CEL explains these principles but does not select tariffs or recommend suppliers.

What the cap does not solve

A tariff can comply with the cap and still be unaffordable for a household with low income or high essential demand. The cap does not correct a wrong meter reading, remove old debt or ensure a suitable Direct Debit.

Check billing problems separately. If you are struggling to pay, speak to your supplier and seek independent support. Do not reduce essential heating or disconnect necessary equipment simply to make consumption fit a headline annual figure.

Sources and further reading

Browse the Hub: Household resources

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