The Energy Price Cap: How the Default Tariff Cap Is Set

The energy price cap, properly called the default tariff cap, limits how much a supplier may charge for each unit of gas and electricity and how much it may charge as a daily standing charge. It does not limit the total bill. The more energy a household uses, the higher that bill will be¹. Separate caps are set for gas and for electricity, and a separate level is set for each of the 14 energy supply regions of Great Britain³.

Ofgem sets a new level every three months². The wholesale element is built from a 12 month forward view of gas and electricity prices, and the cap has been set quarterly since summer 2022, having previously moved every six months⁴. For 1 October to 31 December 2025 the level for a typical household using electricity and gas and paying by Direct Debit was £1,755 a year, a rise of £2.93 a month or £35.14 a year for that typical household⁵. For 1 January to 31 March 2026 the figure for a dual-fuel home with typical usage paying by direct debit was given as around £1,758, and Ofgem confirmed the cap for 1 April to June 2026 would fall by 7%⁶.

Those annual figures are illustrations, not ceilings. The cap is quoted as a yearly bill for a typical household only to make it easier to understand, and an actual bill will differ⁷. Typical consumption is assumed to be 2,500 kWh for electricity and 9,500 kWh for gas⁸.

What the cap limits, and what it leaves open

The cap is a limit on price per unit, not on spend. Ofgem's own description is that the level is the maximum a supplier can charge for a unit of energy and standing charge together, and that it does not limit the cost of a total bill². From the first public guidance in 2018 the point was made plainly: the limit is not on the total bill, which varies depending on how many units are used in a billing period¹³. When the caps first took effect the regulator described them as a cap on a unit of gas and electricity, with standing charges taken into account, and not a cap on overall bills¹⁴.

This matters for anyone trying to read a headline figure as a budget. A household with high consumption, a poorly insulated fabric or electric heating can pay far more than the quoted typical figure while its supplier stays fully within the cap. A household that uses very little still pays the standing charge every day. The limit is on the rate card, and the household still carries the consumption risk.

For energy independence, the lesson is direct: the cap constrains the price of imported energy, it does not reduce the volume a home imports. The only lever the cap does not touch is demand, and that is the one a household controls through fabric, efficiency and on-site generation.

Who is protected: standard variable and default tariffs

The cap covers households on standard variable and default tariffs, the tariffs a customer ends up on without actively choosing a fixed deal¹⁵. On a standard variable tariff the price can go up or down based on things like the cost of buying energy on the open market, and people on this type of tariff are protected by the cap¹⁶.

Payment method does not affect eligibility. The cap applies to default tariffs whether the household pays by standard credit, Direct Debit, prepayment meter or through an Economy 7 meter⁵. A household put onto a deemed contract, for instance after a supplier fails, is still covered¹⁷.

Published counts of protected customers differ with the date of the document, and the figures are not reconciled between them:

Around four million of those households use a prepayment meter²¹. The cap includes a levelisation allowance whose stated purpose is making sure prepayment and Direct Debit customers pay the same standing charge².

Standard credit is the outlier. Around 16% of customers pay this way, and research suggests up to 43% do not realise it is the most expensive way to pay, with a £135 price premium specifically due to the costs of debt. Standard credit also becomes the default payment method where a direct debit fails, or where prepayment is not appropriate for a customer²². Related protections are set out in the page on prepayment meters and vulnerable customer protections.

Where the cap stops: fixed deals, business, heat networks and oil

A household that has chosen a fixed-term tariff is outside the cap. The cap applies where a customer has not signed up for a fixed-term contract with their supplier³, and prices on a chosen fixed-term tariff are not protected²¹.

Several other forms of household energy fall outside it entirely:

• Business energy contracts are not protected by the cap¹².
• Heat networks are not covered by the cap or by the former Energy Price Guarantee, being classed as commercial supplies²⁴. Parliament's account is the same: the cap does not cover district heating systems or the energy costs of businesses²⁵. The rules that do apply are covered in heat network regulation.
• Heating oil is not regulated by Ofgem and is not covered by the cap²⁶. Trading Standards has put the consequence bluntly.

Which? makes the same point for households off the gas grid: unlike gas and electricity, heating oil prices are not covered by the cap²⁸.

Northern Ireland sits outside the scheme altogether. The cap sets maximum unit prices and standing charges for customers in each energy supply region of Great Britain³, and during the Energy Price Guarantee period energy prices were not capped in Northern Ireland, where suppliers have the flexibility to set their tariffs independently to reflect their costs of operating²⁹. Domestic tariff oversight there rests with the Utility Regulator.

How Ofgem sets the level each quarter

The cap was introduced on 1 January 2019⁴, coming into force at the beginning of that year³ and applying across all payment types from that month⁸. It was set every six months until summer 2022, when Ofgem moved to quarterly setting in response to high and volatile wholesale prices⁴. The regulator now revises the cap each quarter³ and reviews and sets a level for how much a supplier can charge for each unit of energy and daily standing charge every three months⁵.

Wholesale prices are the driving input: the cap is calculated according to wholesale energy prices during each price cap assessment period¹¹, and wholesale prices paid by energy firms determine the cap¹. Ofgem sets the wholesale index on a 12 month forward view of gas and electricity prices⁴. The published levels are exclusive of VAT, which suppliers apply to consumers' bills³¹.

Announcements come roughly six weeks before the new level takes effect¹¹. That gives households time to compare a fixed offer before the change lands. The April 2026 reduction, for example, was confirmed in Parliament ahead of the cap reducing on 1 April³².

The underlying cost evidence is not guesswork. Ofgem's 2023 wholesale costs review drew on data collected from 11 suppliers representing 96% of the retail market, and noted that any resulting changes would at the earliest be made in the July to September 2024 cap period³³. Methodology changes move slowly, by consultation, a process set out in how energy policy is made. Ofgem also states that it monitors compliance:

What the cap is made of

The cap is built from cost allowances rather than a single number. The components Ofgem lists are wholesale costs, network costs, policy costs, operating costs, EBIT, headroom, the levelisation allowance, and VAT at 5% on gas². The stated basis is how much it costs, on average, to get energy to a home³⁵, and the purpose is that customers pay no more than is necessary for an efficient supplier to recover its costs and earn a reasonable level of profit³⁶.

Network costs are the second most important component, at almost 30% of the total³. The charges themselves are explained in electricity network regulation and the charges on your bill. Policy costs were reduced in April 2026 when the government ended a levy-funded energy efficiency scheme and shifted funding for the largest renewable generation support scheme to general taxation³. That is a transfer rather than a saving: the cost moves from the bill to the tax base.

Wholesale volatility explains the cap's history. Rapid increases in wholesale prices from mid-2021 led to a 54% increase in the cap in April 2022⁸, and a further rise of 30 to 50% was forecast for October 2022³⁸. Early in the cap's life, Ofgem noted wholesale costs were 17% higher than when the cap was originally set³⁷.

Cap levels by payment method

For 1 October to 31 December 2025, Ofgem published totals for each payment type, each rising by £35, or 2%, on the previous quarter³⁴:

In monthly terms Ofgem put it as a typical household on a default tariff paying £102 for what then cost £100 per month³⁹. Unit rates and standing charges quoted for 1 January to 31 March 2026 were 27.69p per kWh for electricity with a 54.75p daily standing charge, and 5.93p per kWh for gas with a 35.09p standing charge⁶.

Earlier moves show the scale of quarterly change. The April 2025 rise added £111 for an average household per year, around £9.25 a month, over the three-month cap period⁴⁰. The January to March 2024 cap was 5% higher than the previous one¹⁹.

What a given home pays varies with where it lives, payment method, fuel type and meter type². Published caps for individual quarters have been restated in different Ofgem tables using different consumption assumptions, so figures quoted for the same region and quarter do not always agree; where they differ, both the assumption and the source date matter.

Standing charges: a daily fee that cannot be avoided

A standing charge is a daily charge that customers pay even if they use no energy⁴¹. It is set by the supplier and included in the cap set by Ofgem⁴², and it cannot be opted out of or reduced⁴³. Suppliers are not, however, required to include a standing charge at all⁴⁴.

Its stated purpose is to recover the costs required to provide energy company services, including providing and maintaining the wires, pipes and cables that deliver power to a customer's door, through to the staff and buildings required for the energy business to function⁴¹. The cap sets a ceiling on how much suppliers can charge for it⁴⁵, and that ceiling is reviewed quarterly⁴⁶.

The direction has been upward. Price cap tariff electricity standing charges rose from 22p a day in October 2019⁴⁴; a later reading put the cap at 60.97p a day for electricity and 31.65p a day for gas⁴⁷. For October to December 2025, standing charges rose by 4% for electricity and 14% for gas³⁹, and an expansion of the Warm Home Discount added a total of 7p a day to standing charges, with electricity balancing costs adding around £1.23 a month to the average household bill³⁹. From April 2025, some households saw an increase in standing charges of up to £20 a year for a typical dual fuel consumer⁴⁰.

National Energy Action attributes the rise to the cost of maintaining infrastructure and delivering government obligated programmes, to paying for the transfer of customers of failed energy suppliers to new suppliers, and to a conscious decision from Ofgem on how to pay for energy networks⁴⁶. The cost of supplier failure is explained further in supplier licensing and supplier failure.

Fourteen regions, fourteen different answers

A separate price cap is set for each of the 14 energy supply regions, and it applies throughout that region with no breakdown below regional level³. Regional differences mainly reflect the cost of transporting energy, which is why increases to those costs feed through unevenly⁵.

Ofgem's benchmark electricity figures for 1 July to 30 September 2026 show the spread⁴⁸:

An earlier table for 1 October to 31 December 2025, on Other Payment Method, gave Southern electricity at £155.12 at nil consumption and £936.78 at 3,100 kWh single-rate, with £155.67 and £1,169.11 for a multi-register meter at 4,200 kWh; London was £160.10 and £916.85 single-rate, and £159.00 and £1,142.46 multi-register³¹.

Two households in the same street on the same payment method and the same meter type face the same capped rate. Differences between neighbours therefore come from payment method, meter type, supplier pricing below the cap, or a fixed contract taken at a different time.

Fixed against capped: what the trade-off is

A fixed energy deal locks in the unit rates and standing charges paid over the contract, usually 12 to 24 months⁴⁹. It sits outside the cap, so a household on a fix gains certainty and loses the protection of the quarterly ceiling²¹.

Whether that trade is worthwhile depends on where fixed offers sit relative to the cap at the time. In October 2021 many fixed deals cost more than the cap, meaning a premium was being paid for price security⁵⁰. In September 2026, fixed deals were reported to offer lower savings against the cap than previously⁴⁹. Meanwhile the cap for April to June 2026 was confirmed to fall by 7%, with estimates suggesting it would stay roughly the same until the end of the year⁶.

The cap's own design means a capped price is not a frozen one: the level moves every three months with the forward wholesale index⁴, and Ofgem's stated purpose is protection for people on tariffs where the unit rate can go up or down depending on the energy market². Neither option removes exposure to wholesale gas. A fix postpones it to the renewal date; the cap passes it through quarterly.

What the cap means for a self-sufficient home

The cap is price regulation, not supply security. It governs what a licensed supplier may charge a household that remains connected, and it leaves untouched the two things that determine a bill: how many units the home imports, and the daily charge for holding the connection. A household reducing dependence on imported energy is working on the first of these, and the cap gives no relief on the second.

Dependencies that remain under the cap are worth stating plainly. The household still depends on a licensed supplier, on the gas and electricity networks whose charges make up almost 30% of the cap³, on government policy costs that can be moved between bills and taxation³, and on wholesale markets set by a 12 month forward view⁴. Off-grid heating removes the supplier but not the exposure: heating oil sits outside the cap entirely²⁶, and so does heat delivered through a heat network²⁴.

Households seeking to understand the wider framework can read the regulation and policy pillar and the page on Ofgem, which sets the cap and monitors supplier compliance against it³⁴. Where a household disputes how the cap has been applied to its account, the routes are set out in energy complaints and redress.