Energy Price Cap Explained: What It Means for Your Bills in 2026
The energy price cap limits unit rates and standing charges, not your total bill. Learn how Ofgem calculates it, when it changes, and whether it applies to your tariff.
The energy price cap limits how much suppliers can charge per unit of energy (kWh) and for daily standing charges. It doesn’t cap your total bill – if you use more energy, you pay more. The cap applies to default and standard variable tariffs, not fixed-rate deals.
The energy price cap protects millions of UK households from excessive energy costs. It limits unit rates and standing charges, but your total bill still depends on how much energy you use.
What is the Energy Price Cap?
The energy price cap is a maximum limit set by Ofgem (the Office of Gas and Electricity Markets) on:
- Unit rates: The price per kilowatt-hour (kWh) of gas and electricity
- Standing charges: The daily fixed fee
It was introduced in January 2019 to protect consumers on default and standard variable tariffs.
Important: The cap limits prices per unit, not your total bill. If you use more energy, you pay more.
What Does the Price Cap Cover?
The price cap applies to:
- Default tariffs: The tariff you’re automatically moved to when a fixed-rate deal ends
- Standard variable tariffs: Variable-rate tariffs that aren’t fixed-price deals
- Prepayment meter customers: Those who pay for energy in advance
The cap does not apply to:
- Fixed-rate tariffs (where you’ve agreed a price for a set period, usually 1-2 years)
- Business energy contracts
- Some green energy tariffs (in specific circumstances)
What is the Current Energy Price Cap?
Note: Check Ofgem’s website for the latest confirmed Q1 2026 price cap figures. The cap changes every three months.
As of Q1 2026, the typical annual energy bill under the price cap is approximately £1,900-£2,000 for a household using:
- 12,000 kWh of gas per year
- 2,900 kWh of electricity per year
- Paying by direct debit
This is based on the current unit rates and standing charges set by Ofgem. Prepayment meter customers typically pay slightly more.
How Does Ofgem Calculate the Price Cap?
Ofgem reviews the cap every three months and sets it based on:
Wholesale Energy Prices
The biggest factor is the wholesale cost of gas and electricity. When wholesale prices rise (due to international demand, supply disruptions, or geopolitical events), the cap increases. When they fall, the cap decreases.
Network Costs
The cost of maintaining and upgrading the UK’s energy infrastructure (power lines, gas pipes) is factored into the cap. These costs are relatively stable but increase over time as the network is upgraded.
Policy Costs
Government policies, such as:
- Renewable energy subsidies (feed-in tariffs, contracts for difference)
- Energy efficiency schemes (ECO4, Great British Insulation Scheme)
- Social support programmes
These costs are spread across all energy consumers.
Operating Costs
Suppliers’ operating costs, including customer service, billing, and administration, are considered when setting the cap.
Allowable Profit Margin
Ofgem allows suppliers a small profit margin (typically around 1.9%) to ensure they can operate sustainably.
When Does the Price Cap Change?
The energy price cap is reviewed and updated every three months:
- 1 January to 31 March (Q1)
- 1 April to 30 June (Q2)
- 1 July to 30 September (Q3)
- 1 October to 31 December (Q4)
Ofgem announces the new cap levels approximately one month before they come into effect. For example, the Q2 cap (April-June) is usually announced in late February.
What Happens When the Price Cap Changes?
When the cap changes:
- Your supplier updates your rates: If you’re on a default or standard variable tariff, your unit rates and standing charges will change to the new cap levels
- Your direct debit may change: Suppliers may adjust your monthly payments if the cap changes significantly
- You can still switch: Even if the cap falls, you might find a cheaper fixed-rate deal
You don’t need to do anything – the changes happen automatically if you’re on a capped tariff.
Does the Price Cap Apply to Prepayment Meters?
Yes, but prepayment meter customers have a separate cap that’s usually slightly higher than the direct debit cap. This reflects the higher costs of operating prepayment meters.
The prepayment cap protects around 4 million households who pay for energy in advance.
Energy Price Cap History
The price cap has changed significantly since it was introduced:
| Period | Typical Annual Bill (Direct Debit) | Notes |
|---|---|---|
| Q1 2019 | £1,137 | Cap introduced |
| Q1 2020 | £1,042 | Lowest cap level |
| Q1 2021 | £1,042 | Remained stable |
| Q2 2021 | £1,138 | First increase |
| Q4 2021 | £1,277 | Continued rises |
| Q2 2022 | £1,971 | Significant increase |
| Q4 2022 | £2,500 | Energy Price Guarantee introduced |
| Q2 2023 | £2,074 | Price Guarantee ended |
| Q1 2024 | £1,928 | Falling from peak |
| Q1 2025 | £1,900-£1,950 | Continued stabilisation |
| Q1 2026 | £1,900-£2,000 | Current level (check Ofgem for latest) |
Note: These figures are for a typical household (12,000 kWh gas, 2,900 kWh electricity) paying by direct debit. Actual bills vary based on usage and region.
Does the Price Cap Apply to Fixed Deals?
No. If you’re on a fixed-rate tariff, the price cap doesn’t apply. You’ve agreed a price for a set period (usually 1-2 years), and that price is locked in until your deal ends.
When your fixed deal ends, you’ll usually be moved to a default tariff that is protected by the price cap. At that point, you can:
- Stay on the capped default tariff
- Switch to a new fixed-rate deal (which may be cheaper or more expensive than the cap)
- Switch to another supplier
Can I Save Money Even With the Price Cap?
Yes. The price cap provides protection, but you may still be able to save:
Switch to a Fixed-Rate Tariff
Fixed-rate tariffs can sometimes offer lower prices than the cap, especially when wholesale prices are falling. However, always check:
- The unit rates and standing charges
- The length of the fix (1-2 years)
- Exit fees if you want to leave early
- Whether prices can still rise (some “fixed” deals have price increase clauses)
Improve Energy Efficiency
Reducing your energy consumption is the most effective way to lower your bills, regardless of the cap. See our guide on how to reduce your bills for practical tips.
Pay by Direct Debit
Customers who pay by direct debit typically benefit from lower unit rates under the price cap compared to those on prepayment meters or paying quarterly.
Regional Variations in the Price Cap
The price cap varies slightly by region due to different distribution costs. For example:
- London and the South East typically have slightly higher caps
- Scotland and the North of England may have slightly lower caps
The differences are usually small (a few pounds per year), but they reflect the actual costs of delivering energy to different regions.
The Future of the Energy Price Cap
The energy price cap is set to remain in place as a key consumer protection measure. However, Ofgem regularly reviews the cap methodology to ensure it:
- Continues to protect consumers
- Allows suppliers to operate sustainably
- Reflects actual market costs
As the UK transitions to renewable energy sources, the way the cap works may evolve to reflect changing energy costs and market conditions.
Summary
The energy price cap limits unit rates and standing charges for default and standard variable tariffs. It doesn’t cap your total bill – if you use more energy, you pay more. The cap changes every three months based on wholesale energy prices and other costs. While it provides protection, you may still be able to save by switching to a fixed-rate deal or reducing your energy use.
For more information on understanding your energy bills, see our guide to energy bills explained.