Ofgem energy price cap explained
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In short. The Ofgem energy price cap limits the unit rates and standing charges suppliers can charge default-tariff customers in England, Scotland and Wales. It is reset every three months. The widely-quoted headline figure (£1,849/year for the April–June 2025 cap) is for a typical Direct Debit user of 2,700 kWh of electricity and 11,500 kWh of gas — actual bills depend on real usage.
About 22 million UK households are on a default tariff covered by the price cap (Ofgem, 2025). The cap is reset on 1 January, 1 April, 1 July and 1 October each year, using a wholesale-energy formula published by Ofgem.
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How the cap works
- Ofgem sets maximum per-kWh unit rates for electricity and gas
- Ofgem sets a maximum daily standing charge for each fuel
- Both vary by region (14 distribution areas) and payment method (Direct Debit, Standard Credit, Prepayment)
- Suppliers can charge less than the cap but no more (with limited cost-recovery exceptions)
- There is no cap on total annual bill — only on the rates
Why the headline figure can mislead
The widely-reported 'typical bill' figure uses Ofgem's Typical Domestic Consumption Values (TDCVs) — currently 2,700 kWh electricity and 11,500 kWh gas a year. Real households vary widely. A small flat with no gas may pay closer to £700; a large detached house with electric heating can exceed £4,000.
Press headlines also often quote the Direct Debit cap. Prepayment customers and customers on Standard Credit (cheque/cash) pay slightly different rates — historically higher, but since 1 July 2023 prepayment and Direct Debit pay broadly the same.
Standing charges
Standing charges are a fixed daily fee for being connected to the grid (about 50–60p/day for electricity and 30p/day for gas in mid-2025, varying by region). They are charged regardless of usage. Ofgem opened a consultation in early 2024 on reforming standing charges; an option for a 'no standing charge' tariff is being phased in for some customers from 2025.
FAQ
- Does the price cap apply to fixed-rate tariffs?
- No — the cap only applies to default (variable) tariffs. Fixed tariffs sit outside the cap; the tariff price is fixed for the duration of the deal and is whatever the supplier and customer agreed.
- Is there a separate price cap for prepayment meters?
- Yes — Ofgem sets a separate cap for prepayment customers. Since 1 July 2023, the prepayment cap has been broadly equalised with the Direct Debit cap, reversing the historical 'prepayment penalty'.
- Are businesses covered?
- No — the price cap is for domestic customers only. Business energy contracts are negotiated individually and have no statutory cap.