How does the UK energy price cap actually work?

The UK energy price cap is a limit set by Ofgem on the maximum unit rates and standing charges that suppliers can charge typical households on standard variable and default tariffs. It does not cap your total bill; instead it caps the price per unit of gas and electricity you pay, based on an assumed ‘typical’ level of annual consumption. If you use more energy than the typical usage, your bill will still be higher than the headline cap figure. The cap is reviewed regularly and updated in line with wholesale energy costs, network charges, policy costs and a small allowance for supplier operating margins.

Who sets the UK energy price cap and how often does it change?

The energy price cap is set by Ofgem, the independent energy regulator for Great Britain. Ofgem calculates the cap using a detailed cost model that includes wholesale gas and power prices, network charges, policy and environmental levies, operating costs and a targeted supplier profit margin. The cap is reviewed and adjusted regularly in line with market conditions, currently on a quarterly basis. This means your unit rates and standing charges can go up or down when a new cap period starts, even if you stay on the same standard variable tariff.

Which tariffs and customers are protected by the energy price cap?

The energy price cap mainly applies to domestic customers on standard variable or default tariffs, including those who have not actively switched in a long time or whose fixed deal has ended and who have been rolled onto a supplier’s default tariff. It also covers certain prepayment meter customers under a related cap. The cap does not usually apply to fixed-term tariffs, special introductory deals, or most business energy contracts. If you are on a fixed deal, your prices are set by your contract rather than the cap until your fixed term ends.

Can my energy bills still rise even when the price cap is in place?

Yes. The price cap can go up when wholesale energy prices and other underlying costs increase, which means your unit rates and standing charges may also rise at the next cap review. Your total bill can also increase if you use more energy, for example during cold weather, even if the cap level stays the same. The cap is a consumer protection against excessive pricing, not a guarantee of a fixed or falling bill. To manage your costs, it is important to monitor your usage, improve energy efficiency where possible, and compare tariffs so you are not overpaying.

How is the ‘typical household’ energy use calculated for the price cap?

Ofgem bases the headline price cap figures on what it calls a ‘typical domestic consumption value’ (TDCV) for gas and electricity. These values are estimates of average annual usage for a dual fuel household, based on national consumption data. The cap level you see quoted in the media is the annual bill for a typical household using these TDCVs on a standard variable tariff. Your own bill may be lower or higher depending on your property size, insulation, heating type, appliances and behaviour. The actual unit rates and standing charges set by the cap are what really matter for your costs.

Will I save money by switching energy supplier if the price cap exists?

You can still save money by switching, even with the price cap in place. The cap is a ceiling, not a fixed price, so suppliers are free to offer tariffs below the cap level. If you are on a standard variable or default tariff, especially with a large supplier, you may be able to move to a cheaper fixed or variable deal that undercuts the cap. Comparing tariffs and switching to a competitive deal, alongside improving your home’s energy efficiency, remains one of the most effective ways to cut your bills and protect yourself against future cap increases.

What happens when the energy price cap goes down?

When the energy price cap falls, suppliers must reduce the unit rates and standing charges they charge customers on standard variable and default tariffs in line with the new cap. Your bills should go down if your usage stays the same, although the reduction may be smaller than the headline figure if your consumption differs from the typical levels used in the cap calculation. A lower cap can also influence the wider market, encouraging more competitive fixed deals. However, prices can rise again at future reviews, so it is still worth considering whether locking in a good fixed tariff and using less energy could offer better long-term value.

How can I reduce my energy costs if I am already protected by the price cap?

Even if your tariff is covered by the energy price cap, there are several ways to reduce your costs. First, compare deals and consider switching to a cheaper fixed or variable tariff below the cap level if one is available and suitable for your needs. Second, improve energy efficiency at home by upgrading insulation, controlling heating and hot water more effectively, switching to LED lighting and using smart controls where possible. Third, monitor your usage regularly with meter readings or a smart meter so you can identify and cut unnecessary consumption. If you are struggling to pay, speak to your supplier early about support options and check whether you qualify for government schemes or grants.

How do UK energy price caps actually work for your home?

Q: Does the energy price cap limit how much I pay for my energy bill?

No, the energy price cap does not directly limit the total amount you pay. It limits the maximum unit rate (pence per kWh) and daily standing charge suppliers can charge an average household on a default tariff. Your final bill depends on how much gas and electricity you actually use. Use more than the typical consumption and you will pay more than the quoted annual cap figure; use less and you will pay less. This is why reducing your energy usage and choosing a competitive tariff are still key to keeping costs down.

The UK energy price cap is meant to protect households from unfairly high prices — but it does not cap your total bill. Instead, it limits what suppliers can charge you per unit of gas and electricity, plus the daily standing charge, when you’re on a standard variable tariff.

On this page we explain, in plain English, how the home energy price cap works, what it really means for what you pay, and how you can still cut your bills by using less energy or switching deals when it makes sense.

Understand the price cap — take control of your bills

The Ofgem price cap changes every three months and can move up or down. If you’re on a supplier’s default or standard variable tariff, your unit rates and standing charges will usually follow the latest cap.

Knowing how the cap is calculated — and how your usage affects what you pay — helps you choose whether to stay on a capped tariff or fix your rates instead.

Find out what you really pay under the cap
See how standing charges and unit rates work
Learn the difference between capped and fixed tariffs
Discover simple ways to lower your annual bill

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Share a few details and we’ll help you explore potential savings and tariff options for your household.

What is the UK home energy price cap?

The UK home energy price cap is a limit, set by the regulator Ofgem, on what energy suppliers can charge customers on certain tariffs for:

The unit rate you pay for each kilowatt hour (kWh) of gas and electricity you use
The daily standing charge for having a connection to the grid

It applies to households on standard variable tariffs and on most default tariffs (the deal you move to automatically when a fixed deal ends), including those paying by direct debit, on receipt of bill and most prepayment meters.

Ofgem reviews the cap every three months, usually taking effect on 1 January, 1 April, 1 July and 1 October. The cap can go up or down in line with changes in wholesale energy costs and other industry costs.

It caps rates, not your total bill

The price cap limits the price per kWh and standing charge, not how much you can be charged overall. Use more energy and you will still pay more.

Applies to standard tariffs

The cap mainly covers standard variable tariffs. Fixed-rate deals and some special tariffs sit outside the cap rules.

Varies by region and meter type

There isn’t one single national price. Cap levels vary by region, payment method and whether you use a prepayment meter.

How does Ofgem calculate the energy price cap?

Ofgem calculates the cap using an estimate of the fair costs energy suppliers face in serving a typical household, plus a small allowance for profit. This includes:

Wholesale energy costs — what suppliers pay to buy gas and electricity on the market
Network costs — maintaining pipes, wires and the national grid
Operating costs — customer service, billing, metering and IT
Environmental and social obligations — government schemes added to bills
Bad debt and other allowances — covering customers who do not pay
Reasonable profit margin — so suppliers can stay in business

As these underlying costs change, the cap threshold moves too. That’s why you’ve seen the cap rise sharply when wholesale prices spike, then fall again as markets stabilise.

Why the “typical household” number is confusing

When Ofgem announces a new price cap, you often see a headline like:

“Typical household bill capped at £X per year”

This is only an example based on average usage. It is not a limit on your personal bill.

If you use more than the typical household, you’ll pay more
If you use less, you’ll pay less
Your own bill depends on both the cap level and your actual consumption

The cap is about the rate you pay per unit, not the total you pay per year.

Standing charges vs unit rates: how your bill is built

Your home energy bill is made up of two main parts: the daily standing charge and the unit rate for each kWh of energy used. The price cap places a maximum on both of these for covered tariffs.

Standing charge

The standing charge is a fixed daily fee, usually shown as pence per day, that you pay just to have a gas or electricity supply connected to your home.

It helps cover the cost of maintaining the network and managing your account, even if you use very little energy. Under the cap, suppliers can only charge up to a certain standing charge on default tariffs.

Many households with low usage now find standing charges make up a significant share of their total bill.

Unit rate (price per kWh)

The unit rate is the price you pay for each kilowatt hour (kWh) of gas or electricity you actually use. It is shown in pence per kWh.

The price cap sets a maximum unit rate for gas and electricity on standard variable tariffs. Your supplier can charge less than the cap, but not more.

Reducing your energy use directly reduces the part of your bill based on unit rates, which is why efficiency and good habits still matter so much.

Who does the UK energy price cap apply to?

The home energy price cap is designed to protect domestic customers in Great Britain (England, Scotland and Wales). It does not usually apply to business or commercial energy.

Covered by the cap

Households on a standard variable tariff (SVT) with a licensed supplier
Customers on most default tariffs after a fixed deal expires
Many homes with a prepayment meter (PPM), under a related cap
Most payment methods — direct debit, prepayment and standard credit (pay on receipt of bill)

Not usually covered by the cap

Fixed-rate tariffs agreed for a set term (unless priced in relation to the cap)
Special or tracker tariffs that closely follow wholesale prices
Business energy contracts or commercial premises
Some heat networks or communal heating systems
Customers in Northern Ireland, which has a separate regulatory system

If you’re unsure whether your home tariff is covered by the price cap, check your latest bill or online account. Look for “standard variable”, “default tariff” or similar wording, or ask your supplier directly.

Does the price cap affect smart meters?

The price cap is about your tariff type, not the meter itself. If you have a smart meter and you are on a standard variable tariff, your prices are still capped.

Smart meters can, however, help you see your usage in real time, which makes it easier to cut waste and manage your bill under the cap.

Some suppliers offer special time-of-use or “smart” tariffs for electric vehicles and off-peak usage. These may sit outside the standard cap rules, so check the terms carefully.

What the energy price cap means for your home bills

When a new cap level comes in, your supplier will usually update the prices on your standard variable tariff automatically. This may change your monthly direct debit, your prepayment top-ups, or the bill you receive for pay-on-receipt customers.

If the cap goes up

When Ofgem raises the cap, suppliers are allowed to increase your unit rates and standing charges up to the new maximum. Your bills may rise even if you use the same amount of energy.

To soften the impact, you can:

Review your direct debit to avoid falling into debt
Improve your home’s efficiency — insulation, draught proofing, LED lighting
Look out for government support schemes and supplier hardship funds

If the cap goes down

When the cap falls, your capped tariff unit rates should drop too. This can reduce your annual bill, especially if you use a lot of gas or electricity.

However, some suppliers may keep your direct debit payments higher for a time to help pay off any existing debt from previous high-price periods.

It’s always worth checking your tariff if prices fall — from time to time, suppliers may offer fixed deals priced below the new cap.

Should you stay on a capped tariff or fix your energy?

The choice between staying on a price-capped standard variable tariff and moving to a fixed-rate deal depends on how you feel about risk and where prices may head next.

Staying on a capped standard variable tariff

Pros: You benefit automatically if the price cap falls. No exit fees in many cases, so you can switch later.
Cons: Your prices can rise every three months if the cap goes up, making budgeting harder.

Moving to a fixed-rate tariff

Pros: Unit rates are locked in for a set period, giving more certainty over your future bills.
Cons: If the cap falls significantly, you may find yourself paying more than you would on a capped tariff. Some fixes charge exit fees.

Before you fix, compare the fixed tariff’s unit rates and standing charges to the current cap, and think about how comfortable you are with possible price changes over the next 12–24 months.

Need help comparing options?

If you’re not sure whether to stick with a capped tariff or lock into a fixed deal, we can help you weigh up the pros and cons based on your home and usage.

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How to reduce your home energy bills even with a cap in place

The energy price cap sets a maximum rate, but you still have plenty of control over how much you pay each year. Focusing on both efficiency and tariff choice can unlock meaningful savings.

Cut wasted energy

Turn heating down by 1°C and use thermostatic radiator valves
Seal draughts around windows, doors and loft hatches
Swap halogen bulbs for efficient LEDs
Only boil as much water as you need in the kettle

Improve home efficiency

Top up loft insulation to recommended depths
Consider cavity wall insulation where suitable
Service your boiler and bleed radiators regularly
Look into smart heating controls for better scheduling

Check for better tariffs

Review your tariff whenever the price cap changes
Compare fixed deals against the current cap
See if off-peak or EV tariffs could suit your lifestyle
Ask your supplier about any loyalty or social tariffs

UK home energy price cap – frequently asked questions

Is my total annual bill capped?

No. The cap only limits what suppliers can charge for each unit of energy and the standing charge. Your total bill depends on how much gas and electricity you actually use.

How often does the cap change?

Ofgem reviews the price cap every three months. New levels usually apply from 1 January, 1 April, 1 July and 1 October.

Does the cap apply if I live in a flat?

Yes, as long as you have your own domestic energy account with a licensed supplier. If your landlord or freeholder buys energy for the whole building and recharges you, the cap may not apply directly.

What if I have a prepayment meter?

Prepayment customers are protected by a related prepayment meter cap. This works in a similar way to the main cap but the exact unit rates and standing charges may differ.

Can suppliers charge less than the cap?

Yes. The price cap is a maximum, not a fixed price. Suppliers are free to offer tariffs below the cap and to compete on price and service.

Will the cap stay forever?

The price cap is a regulatory measure, and the government has indicated it is not intended to be permanent. Any major change would go through consultation and be widely publicised.

Get clarity on your home energy costs

Understanding how the UK energy price cap works is the first step. The next is making sure your household is on the most suitable tariff and using energy as efficiently as possible.

Share a few quick details and we’ll help you explore your options, from capped tariffs to fixed deals and home energy efficiency improvements.

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Updated on 22 Jan 2026