The UK energy price cap explained

The UK energy price cap is one of the most misunderstood pieces of consumer protection in personal finance. It’s not a cap on your bill. It’s not a cap on what energy can ever cost. And it doesn’t apply to most fixed-rate tariffs. This is what it actually does.

What the cap is

The cap is a limit, set by the regulator Ofgem, on the per-unit price that energy suppliers can charge customers on their standard variable tariff (SVT) — also called the “default tariff”.

There are two components capped:

• Unit price (pence per kWh) for gas and for electricity, separately.
• Daily standing charge (pence per day) for gas and electricity, separately.

The cap is set every three months — for January–March, April–June, July–September and October–December — based on Ofgem’s assessment of wholesale prices, network costs, supplier operating costs and policy levies. The current cap level is published on Ofgem’s price cap page.

What the cap doesn’t do

Three common misconceptions:

1. It doesn’t cap your total bill. Use more energy, pay more. The cap limits the price of each unit, not the amount of units you use.

2. It doesn’t apply to fixed-rate deals. If you signed up for a one- or two-year fixed-price contract, those rates are guaranteed by the supplier for the term — they can be above or below the cap. Fixed deals during the 2022/23 energy crisis were often above the cap; in calmer periods, they can be below.

3. It doesn’t apply to all customers. Most prepayment-meter customers, all SVT customers, and customers on default deemed contracts are covered. Customers on fixed tariffs, green tariffs marketed outside the cap framework, and certain commercial-style domestic deals are not.

The “typical household” figure

Whenever the cap is announced, the headline number is a typical-household annual figure — what an average household using a defined amount of gas and electricity would pay per year under the new cap. This is not your bill. It’s a benchmark for comparison.

The typical household reference values are currently:

• Gas: about 11,500 kWh per year
• Electricity: about 2,700 kWh per year (dual-fuel)

Compare your actual annual usage on a recent bill against these reference figures. If you use more, your real cap-level bill is higher than the headline; if you use less, it’s lower.

When a fixed deal beats the cap

The decision between staying on the (capped) SVT and switching to a fixed deal comes down to three factors:

• Direction of wholesale prices. If wholesale gas is expected to rise, fixed deals get more attractive — you lock in today’s prices before the cap rises. If wholesale gas is falling, the cap will drop, and a fixed deal can lock you above where the cap is heading.
• Your view of personal flexibility. Fixed deals usually have exit fees (often £25–£75 per fuel) if you leave early. Sticking with the SVT keeps you flexible.
• What the “below cap” discount is. Fixed deals advertised at, say, 5% below the prevailing cap are clearly better today. The question is whether the cap will fall faster than 5% over the deal’s term.

Aggregator sites like Uswitch, MoneySavingExpert’s Cheap Energy Club and Compare The Market all show currently-available fixed deals against the cap level — useful for comparing.

Standing charges — the bit that’s harder to escape

Standing charges have risen substantially since 2021, partly to absorb the costs of suppliers that failed during the 2021–22 wholesale-price spike. For low users, the standing charge can dominate the bill — a household using very little electricity still pays the full standing charge every day.

Some “no standing charge” tariffs exist, but they typically come with much higher unit rates — useful for very-low-usage second homes, rarely competitive for a normal household. Ofgem has consulted multiple times on reforming the structure; check the Ofgem consultation page for the current state of play.

Smart meters and time-of-use tariffs

Smart meters open up tariffs that the cap doesn’t directly address — particularly time-of-use (also called dynamic) tariffs where the unit price varies hour-by-hour based on wholesale prices.

The most-discussed examples in the UK are Octopus Tracker (daily pricing) and Octopus Agile (half-hourly pricing). The economics work when:

• You have a smart meter (SMETS2, not the older SMETS1 in most cases).
• You can shift significant load to off-peak periods — EV charging, heat-pump heating, washing machine, dishwasher.
• You’re comfortable with variability in your daily bill.

For an average household running on a gas boiler with no EV, the gains from time-of-use are modest — a few percent. For an EV-driving household able to shift charging to overnight cheap periods, the savings can be substantial.

When the cap doesn’t protect you

Two situations worth knowing:

• If you don’t pay by direct debit, you pay more. The cap is structured with different rates for direct debit, prepayment, and standard-credit customers. Standard credit (paying when the bill arrives) tends to be the most expensive of the three.
• If you’re on the supplier’s “Out of Contract” rate at end-of-fixed-term, it’s the SVT (which is capped) — but you may be missing out on better fixed deals. Most suppliers automatically roll customers onto the SVT after a fix ends. Reviewing the deals available a few weeks before the end of your fix is the cheapest hour of the year for most households.

A reasonable approach

For most households, the decision tree looks like this:

1. Know your actual annual kWh for gas and electricity, from a recent annual statement.
2. Look up the current cap rates and calculate what your bill would be on the cap.
3. Compare to fixed deals currently offered, accounting for any exit fees.
4. Choose the lower one if the difference is material (more than ~3% of the annual bill).
5. Re-check at least once a quarter when Ofgem updates the cap.

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Last updated 22 May 2026. The price cap level changes quarterly — check Ofgem's current cap page for the latest figures. This guide is educational and is not personal financial advice. See our disclaimer.