What Is the Energy Price Cap? Everything You Need to Know

Energy price cap quick answer

The energy price cap is Ofgem’s limit on the unit rates and daily standing charges that suppliers can charge on default tariffs in England, Scotland and Wales. From 1 October to 31 December 2026 it is £1,723 a year for a typical dual-fuel household paying by direct debit. The January 2027 cap is confirmed by 25 November 2026, and the latest forecasts point to a rise of around 16% to 21%, which would put it at roughly £2,000 to £2,100 a year. Households on a fixed tariff are not affected when the cap changes, which is why many people compare fixed deals before the January figure is announced.

Last updated 16 October 2026. This guide is updated again when Ofgem confirms the January to March 2027 cap.

If you pay a gas or electricity bill in the UK, the energy price cap directly affects what you pay. Most people have heard the term but are unclear on what it does, who sets it, and why bills keep rising even with a cap in place. This guide explains how the price cap works in plain English, what it costs a typical household right now, how it is calculated, what the January 2027 price cap is forecast to be, and what households can do about it before winter.

For a personal estimate of what the Middle East conflict could add to your own bill, the Iran conflict energy bills guide and calculator works out a projected increase from your usage. To see what your home costs to heat compared with other UK cities, the Price of a Warm Home Index uses real Ofgem regional rates.

What is the energy price cap?

The energy price cap does not cap your total energy bill. This is the most common misunderstanding, and it is worth being clear about from the start. What the cap limits is the unit rate you pay for each kilowatt hour (kWh) of gas and electricity, and the maximum daily standing charge a supplier can apply. If you use more energy, you pay more. The cap limits the rate, not the total on the bill.

A simple comparison is a petrol price guarantee that limits what a forecourt can charge per litre. If the limit is £1.50 a litre, nobody can be charged more than that per litre, but filling a large tank still costs more than filling a small one. The same logic applies to gas and electricity: the cap sets the price per unit, and your usage decides the final bill.

How much is the energy price cap right now?

The current energy price cap, covering 1 October to 31 December 2026, is £1,723 a year for a typical dual-fuel household in Great Britain paying by direct debit. That is £60 (4%) more than the £1,663 cap for July to September, and it is the second rise in a row.

The £1,723 figure uses Ofgem’s updated Typical Domestic Consumption Values, which changed on 1 July 2026. The headline cap now assumes a household uses 2,500 kWh of electricity and 9,500 kWh of gas a year, down from 2,700 kWh and 11,500 kWh. On the old basis the same October rates would work out at £1,935. Ofgem’s change affects how the headline number is calculated, not the rates you are charged per unit, so check which basis any older article or forecast uses before comparing it with today’s cap.

The unit rates and daily standing charges from 1 October 2026, for a typical direct debit customer across England, Scotland and Wales, are:

Electricity: 26.32p per kWh (up from 26.11p), with a standing charge of 54.83p a day (down from 57.19p). There is no VAT on domestic electricity from 1 October 2026 to 31 March 2027 under a temporary government cut.
Gas: 7.97p per kWh (up from 7.33p), with a standing charge of 29.68p a day (up from 29.04p), including 5% VAT.

Gas is the fuel driving the rise. The gas unit rate is up around 9% on the previous quarter, while the electricity unit rate has barely moved.

Put together, the typical figures add up like this. Electricity: 2,500 kWh at 26.32p is about £658, plus about £200 in standing charges over the year, which makes roughly £858. Gas: 9,500 kWh at 7.97p is about £757, plus about £108 in standing charges, which makes roughly £865. The two total about £1,723. Rates and standing charges vary slightly by region, so your own figures may differ, and Ofgem publishes the full regional tables each quarter.

January 2027 energy price cap: forecast and announcement date

The cap that applies from 1 January to 31 March 2027 has not been set yet. Ofgem confirms it on or before 25 November 2026, based on wholesale energy prices between 19 August and 17 November 2026. With that assessment window already more than halfway through, forecasters treat a rise as all but certain. The open question is how big it will be.

Forecasts have climbed since the summer. Cornwall Insight now expects the January to March 2027 cap to rise 16%, to about £1,999 a year, which would be the biggest quarterly increase since January 2023. Averaging the forecasts from British Gas, EDF and E.ON gives a rise of around 21%, which on today’s £1,723 works out at roughly £2,085 a year. Earlier forecasts of a 9% rise to around £1,872 have been overtaken, so any article still quoting them is out of date.

On a typical household, those forecasts translate to:

Now (October to December 2026): £1,723 a year, about £143.58 a month.
Cornwall Insight forecast: about £1,999 a year, about £166.58 a month. That is roughly £276 more a year, or £23 more a month.
Supplier average forecast: about £2,085 a year, about £173.75 a month. That is roughly £362 more a year, or £30 more a month.

Those monthly figures are simple averages. Most homes use far more energy between January and March than in summer, so winter bills will be higher than a twelfth of the annual figure whatever the cap is.

Bills are expected to rise because of the continued effect of the Iran conflict on wholesale gas prices, including disruption to shipping through the Strait of Hormuz. Because Ofgem sets each cap from wholesale prices over a fixed window, price spikes feed through to bills several months later. Cornwall Insight has also warned that the April 2027 cap could be higher still if European gas stocks are run down over winter and have to be rebuilt at high prices next summer.

Two more things are worth knowing. First, the temporary VAT cut on electricity runs until 31 March 2027, so unless it is extended, 5% VAT returns to electricity from 1 April. Second, there is pressure on the government to announce help with bills in the 28 October Budget, and the Chancellor has been reported to be considering support for poorer households. Nothing is confirmed, so this guide covers support schemes that already exist in the section below.

Treat every January forecast as a snapshot rather than a promise. Forecasts for the July 2026 cap ranged from about £1,850 to £1,973 before Ofgem confirmed £1,862, and wholesale prices can move in either direction before 17 November. The next announcement after January is due on or before 23 February 2027, for April to June 2027.

Who sets the energy price cap?

The energy price cap is set by Ofgem, the Office of Gas and Electricity Markets. Ofgem is the independent regulator for the energy industry in Great Britain. It was established in 2000 and operates under powers granted by Parliament. It is not a government department and is not directly controlled by ministers, though it works within a framework set by legislation and government policy.

Ofgem introduced the energy price cap in January 2019, following years of concern that customers on standard variable tariffs were being overcharged compared with what competitive market rates would justify. A household that never switched supplier could pay substantially more than an active switcher for identical energy. The cap was designed to end this loyalty penalty, and it now covers about two-thirds of households.

The cap applies in England, Scotland and Wales. Northern Ireland has a separate energy market, with the Utility Regulator responsible for consumer protections there.

When is the next energy price cap announced?

The price cap is reviewed four times a year and changes on 1 January, 1 April, 1 July and 1 October. Until 2022 it changed every six months, but the volatility of wholesale prices during the 2021 to 2022 energy crisis led Ofgem to move to quarterly reviews so the cap could respond faster in both directions.

The key dates are:

25 November 2026 (deadline): cap for January to March 2027, based on wholesale prices from 19 August to 17 November 2026.
23 February 2027 (deadline): cap for April to June 2027, based on wholesale prices from 18 November 2026 to 15 February 2027.
Late May 2027: cap for July to September 2027. Ofgem confirms the exact date nearer the time.

How is the energy price cap calculated?

Ofgem works out the genuine costs that suppliers face in providing gas and electricity to households, then sets the cap at a level that lets efficient suppliers cover those costs and make a reasonable margin. The main components are:

Wholesale energy costs are the largest single element: what suppliers pay on wholesale markets to buy the gas and electricity they sell on. Wholesale prices are set by global supply and demand, geopolitical events, weather and the price of competing fuels. When wholesale prices rise, the cap follows, with a lag of a few months.

Network costs pay for the transmission and distribution infrastructure that gets gas through pipes and electricity through cables to homes. These are relatively stable and cover maintenance, operation and upgrades of the grid.

Policy and environmental costs fund government schemes such as the Warm Home Discount. In April 2026 the government moved much of the cost of the Energy Company Obligation and the Renewables Obligation off energy bills, which cut around £150 from a typical annual bill.

Operating costs and supplier margin cover the cost of running a supply business, a regulated profit margin, and a “headroom” allowance for uncertain costs and risks. VAT is added on top at 5% for gas and 0% for electricity until March 2027.

Ofgem publishes the full methodology and cost breakdown every quarter.

Who is covered by the price cap?

The price cap applies to households on standard variable tariffs and other default tariffs, which is where customers end up automatically if they never choose a different deal. If you have not switched energy supplier or tariff for more than a year, you are almost certainly on one of these.

Households on fixed-rate tariffs are not affected when the cap changes. A fixed tariff locks in specific unit rates for the length of the contract, whatever the cap does. Ofgem figures put around 40% of accounts on fixed deals. That is useful when the cap is rising, because a fixed rate can sit below the capped level. It can cost more when the cap falls, because the fixed rate may end up above the new capped level, and some deals carry exit fees.

What is the prepayment price cap?

Prepayment meter customers are covered by their own cap levels, published by Ofgem alongside the direct debit and standard credit figures. The £1,723 headline figure is the direct debit number, so a prepayment household will see a slightly different typical bill. Ofgem publishes all three sets of figures in its quarterly cap breakdown.

The cap does not apply to heating oil or LPG. More than a million households heat with oil and a smaller number with LPG, and none of them have an equivalent price cap. When global oil prices spike, as they have during the Middle East conflict, oil and LPG households feel the full impact straight away. This is covered in detail in the guide to why the Iran conflict is hitting oil and LPG households harder than gas.

What are the benefits of the price cap?

The clearest benefit is protection from the loyalty penalty that existed before 2019. Customers who stayed on a standard variable tariff for years could pay much more than people who switched regularly. The cap means no household on a default tariff can be charged more than the capped unit rate, however long they have been with their supplier.

The cap also adds a degree of stability. Because it is set from average wholesale prices over an assessment window rather than daily movements, a sharp spike in one week does not immediately reach household bills.

During the 2021 to 2023 energy crisis, the cap structure also made emergency support easier to deliver. When Ofgem calculated that the cap would need to reach £4,279 in January 2023, the government introduced the Energy Price Guarantee to hold a typical bill at around £2,500 and subsidise the difference. Without an existing cap mechanism, that kind of intervention would have been much harder to put in place quickly.

What are the criticisms of the energy price cap?

The most basic limitation is that it caps unit rates, not total bills. A household that uses more energy than the Ofgem typical will pay more than the headline figure even though its unit rates are capped, and cold weather makes this more likely.

Critics also argue the cap reduces the incentive to switch supplier and shop around, because it removes the worst outcomes from staying on a default tariff.

Standing charges are a further point of contention. The daily fee for being connected to the network works out at around £200 a year for electricity and £108 a year for gas under the October 2026 cap. Campaigners including Martin Lewis argue that standing charges penalise low-usage households, because the daily charge is the same however little energy is used. Ofgem now requires suppliers to offer at least one low standing charge tariff, but the wider structure is still criticised.

How is the Middle East conflict affecting UK energy bills?

The quarterly structure of the cap means events that move wholesale prices sharply can take several months to reach household bills. UK wholesale gas prices rose sharply after the Iran conflict began in late February 2026, and that is what drove the 13% rise in the July cap and contributed to October’s further 4% increase. Gas unit rates have risen in each of the last two quarters, while electricity rates have been held roughly steady, helped by the temporary VAT cut.

With the cap reset only every three months, higher wholesale prices in the January assessment window feed straight into the January to March cap. That is the main reason forecasters expect a further rise rather than a fall. For the full breakdown of what this means for your own bill, see the Iran conflict bill impact calculator, or work out your running costs with the heating cost calculator.

What can households do before the January 2027 price cap?

The cap cannot be negotiated, but there are practical steps that reduce how much a rise hurts.

Compare fixed tariffs. Ofgem said alongside the October announcement that fixed deals were available at £100 or more below the new cap. A fixed deal protects you from the January change for the length of the contract, but check the unit rates and standing charges, any exit fees and the contract length, and make sure the deal suits how much energy you actually use.

Submit meter readings. Regular readings, or a smart meter, mean you are billed for what you really use rather than an estimate, which matters most when rates are changing.

Check support you may already qualify for. Schemes that run each winter include the Warm Home Discount, the Winter Fuel Payment and Cold Weather Payment. Free insulation and heating upgrades may also be available to eligible lower-income households through the Warm Homes Local Grant. The full range is covered in the energy grants and support hub, and the longer-term picture is in the Warm Homes Plan guide.

Cut how much energy the home needs. The most durable protection against a rising cap is using less energy in the first place. A well-insulated, draught-proofed home pays less wherever the cap is set. Start with thermostat management, draught-proofing and radiator balancing. If a room stays cold whatever the heating does, the house cold diagnostic helps find the cause, and the guides to finding hidden draughts and cold walls in winter cover two of the most common culprits. The complete guide to keeping a UK home warm for cheap sets out the full list of improvements in the order that tends to pay back best.

What doesn’t the price cap protect you from?

The cap cannot protect you from high bills caused by high usage. It does not cover oil or LPG households. It cannot stop large rises when wholesale costs climb and stay high through an assessment period. And it does not apply to fixed tariffs, so a household that fixes while prices are elevated may end up above the capped level if wholesale prices later fall.

Energy price cap history: how has it changed?

The price cap was introduced in January 2019 at £1,137 for typical use. It stayed relatively stable until the 2021 to 2022 energy crisis, when post-pandemic demand, reduced Russian gas supply and the invasion of Ukraine pushed wholesale prices to record highs. The key figures since then are:

October 2021: £1,277
April 2022: £1,971
October 2022: £3,549, when the government introduced the Energy Price Guarantee to hold a typical bill at around £2,500
July 2023: the Energy Price Guarantee ended as wholesale prices fell back
January 2026: £1,758
April 2026: £1,641, a 7% fall after the removal of green levies from unit rates
July 2026: up 13% to £1,862 on the old consumption basis, which is £1,663 on the new basis
October 2026: £1,723 on the new basis (£1,935 on the old basis), a further 4% rise
January 2027: not yet set, with forecasts of around £1,999 to £2,085 on the new basis

Figures up to April 2026 use the older consumption basis, so they are not directly comparable with the 2,500 kWh and 9,500 kWh figures now used for the headline cap.

For practical ways to keep a home warm whatever the cap does, WarmGuide’s home energy and heating advice covers everything from radiators and boilers to insulation and grants.

Energy price cap FAQs

What is the energy price cap in simple terms?

The energy price cap is a limit set by Ofgem on how much suppliers can charge per unit of gas and electricity, and per day in standing charges, on default tariffs in England, Scotland and Wales. It does not limit your total bill, so using more energy still costs more.

What is the energy price cap now?

From 1 October to 31 December 2026 the cap is £1,723 a year for a typical dual-fuel household paying by direct debit. That is based on 2,500 kWh of electricity and 9,500 kWh of gas a year, with unit rates of 26.32p per kWh for electricity and 7.97p per kWh for gas.

How much will the energy price cap be in January 2027?

It has not been set yet. Cornwall Insight forecasts a 16% rise to about £1,999 a year, and the average of British Gas, EDF and E.ON forecasts is a rise of around 21%, roughly £2,085. Ofgem confirms the real figure on or before 25 November 2026.

When will the January 2027 price cap be announced?

Ofgem announces the January to March 2027 cap on or before 25 November 2026. It is based on wholesale prices between 19 August and 17 November 2026, and takes effect on 1 January 2027.

Does the price cap limit my total energy bill?

No. The cap limits the unit rate per kWh and the daily standing charge, not the total. A household that uses more energy than the typical 2,500 kWh of electricity and 9,500 kWh of gas will pay more than the headline cap figure.

Does the energy price cap apply to fixed tariffs?

No. Fixed tariffs lock in their own unit rates and standing charges for the length of the contract, so a change in the cap does not affect them until the deal ends. At that point the household usually moves onto the supplier’s default tariff, which is covered by the cap.

Should I fix my energy tariff before January?

It depends on the deal. Ofgem has said fixed tariffs were available at £100 or more below the October cap, and forecasts point to a higher cap in January, which makes fixing attractive for some households. Check the unit rates, standing charges, exit fees and contract length first, as a fixed deal costs more if the cap later falls below it.

Does the price cap apply to heating oil or LPG?

No. The Ofgem price cap covers mains gas and electricity only. Households that heat with oil or LPG have no price cap and are exposed to wholesale price changes straight away.

Is there VAT on electricity at the moment?

No. Domestic electricity is VAT-free from 1 October 2026 to 31 March 2027 under a temporary government cut. Gas still carries 5% VAT. Unless the cut is extended, VAT on electricity returns on 1 April 2027.

Why is the energy price cap going up?

Mainly because of higher wholesale gas prices linked to the Iran conflict and disruption to supply routes such as the Strait of Hormuz. The cap passes wholesale costs on with a delay, so price rises can take months to reach bills.

Why is my bill different from the price cap figure?

The £1,723 figure is a typical-use average for a direct debit customer in Great Britain. Your own bill depends on how much energy you use, where you live, how you pay and your tariff, so the real cost can be higher or lower.

Does the energy price cap apply in Northern Ireland?

No. The Ofgem price cap covers England, Scotland and Wales. Northern Ireland has a separate energy market regulated by the Utility Regulator.