Ofgem published a consultation on 30 July 2026 proposing changes to the methodology of the Contracts for Difference (CfD) allowance in the energy price cap1. The regulator said it is seeking views on its proposal "to improve accuracy of the allowance"1. The consultation closed on 11 September 2026 and is listed as "Closed (awaiting decision)"1.
The central proposal is a volume reconciliation. Ofgem said it proposes "to introduce a volume reconciliation, reflecting differences between the forecast of CfD generation volumes used to set our allowance, and actual CfD generation"1. The allowance is currently set using a forecast of how much CfD-backed generation will be available; the reconciliation would account for the gap between that forecast and what is actually generated1. Ofgem proposes to implement the change from April 20271.
The consultation also asks for views on a possible simplification of the methodology used to set the CfD allowance, alongside the reconciliation proposal1. Ofgem said it would like to hear from "energy suppliers; energy industry bodies; consumer groups; charities" and others with an interest in how the additional wholesale allowances in the price cap are set1. Responses were to be submitted by 10 September 2026 by email to priceprotectionpolicy@ofgem.gov.uk1.
"We are seeking views on our proposal to change to the methodology of the Contracts for Difference (CfD) allowance in the energy price cap, to improve accuracy of the allowance."
The consultation documents include the main consultation paper and two versions of the wholesale cost allowance methodology annex, one described as a minded-to position and one as an additional methodology change1. The CfD allowance forms part of the wholesale cost element of the energy price cap, which sets the default tariff limit for households on standard variable tariffs1.
Why it matters for households
The CfD allowance is one of the components that feeds into the price cap, and therefore into the unit rates and standing charges that households on default tariffs pay1. The allowance exists to cover the cost of contracts that guarantee a price to low-carbon generators; when wholesale prices are below the agreed strike price, consumers meet the difference through their bills1.
The proposal concerns accuracy rather than the level of support itself. If the forecast of CfD generation volumes used to set the allowance differs from actual generation, the allowance may over- or under-recover the cost. A volume reconciliation would adjust for that difference, which could mean the allowance tracks actual costs more closely rather than carrying a forecast error into the cap period1. Ofgem has not stated in the consultation what the financial effect on household bills would be, and no estimate of the size of any adjustment has been reported1.
For a household's energy independence, the mechanism matters because it determines how much of a bill reflects a fixed support cost rather than the wholesale market. A more accurate allowance reduces the risk that consumers pay for generation that did not occur, or that suppliers absorb a shortfall that is later recovered1. The consultation does not address wider questions of supply sovereignty or household self-generation.
What happens next
The consultation closed on 11 September 2026 and Ofgem lists the status as "Closed (awaiting decision)"1. Ofgem has proposed implementing the change from April 20271. No decision date has been reported1. The process by which such changes are proposed and decided is set out in the site's guide to energy consultations, and the regulator's wider role is covered in Ofgem: what the energy regulator does.