What Is the Ofgem Price Cap?
The Ofgem price cap is one of the most talked-about numbers in UK household finance — but it is also one of the most misunderstood. Most people assume it means their bill is capped at a fixed amount. It does not. This guide explains what the price cap actually limits, how it is set, and what it means for your gas and electricity costs.
If you have ever looked at your bill and wondered why it changed even though you did not switch supplier or tariff, the answer usually lies in the price cap.
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The price cap sets a maximum on two things: the unit rate your supplier can charge per kWh of energy, and the daily standing charge. It does not set a maximum on your total bill. Your bill is calculated by multiplying your actual usage by the unit rate and adding the standing charges for the billing period. If you use more energy than the Ofgem typical household assumption you will pay more than the headline cap figure.
This is a point that confuses many people. When Ofgem announces a cap of £1,663 per year, that figure is based on typical household consumption — around 2,500 kWh of electricity and 9,500 kWh of gas annually. It is an illustration, not a guarantee. Your actual annual bill will differ based on your usage, region and payment method.
Current Price Cap Rates — July to September 2026
From 1 July to 30 September 2026 the price cap is set at £1,663 per year for a typical dual fuel household paying by Direct Debit. This is an increase of 1.3% from the previous quarter's cap of £1,641.
| Fuel | Unit Rate (p/kWh) | Standing Charge (p/day) | Annual standing cost |
|---|---|---|---|
| Electricity | 26.11p | 57.19p | ~£209 |
| Gas | 7.33p | 29.04p | ~£106 |
| Dual fuel total | 86.23p/day | ~£315 |
These are averages across England, Scotland and Wales for Direct Debit customers and include VAT at 5%. Rates vary by region — customers in North Wales and Mersey pay more for electricity than customers in London, for example. Check your bill for the exact rates that apply to your address.
How the Price Cap Is Set
Ofgem reviews and resets the cap every three months — in January, April, July and October. The cap level is calculated using a formula that takes into account several cost components that suppliers face:
- Wholesale energy costs — what suppliers pay to buy gas and electricity on the open market. This is the largest component, accounting for around 40% of a typical bill and is the main driver of cap changes quarter to quarter
- Network costs — the cost of maintaining and investing in the pipes, cables and wires that deliver gas and electricity to homes
- Operating costs — supplier running costs including billing, customer service and smart meter rollout
- Policy levies — government schemes such as the Warm Home Discount and Green Gas Levy, which are funded through energy bills
- VAT — charged at a reduced rate of 5% on domestic energy
- Supplier profit margin — a small allowed return for suppliers
When wholesale prices fall, the cap typically falls. When network investment or policy costs rise, the cap may rise even if wholesale prices are stable. The small rise in July 2026 was driven mainly by higher wholesale costs, which offset a continued reduction in policy levies following the government's November 2025 Budget changes.
Price Cap History
The cap has changed significantly since the energy crisis of 2021–2022. Understanding the trajectory helps explain why bills remain elevated compared to pre-crisis levels.
| Period | Typical Annual Bill | Change |
|---|---|---|
| Pre-crisis (Winter 2021/22) | ~£1,042 | — |
| Oct 2022–Jun 2023 (Energy Price Guarantee) | £2,500 | +£1,458 |
| Jul–Sep 2024 | £1,568 | — |
| Jan–Mar 2026 | £1,758 | +£20 (+1.1%) |
| Apr–Jun 2026 | £1,641 | −£117 (−6.6%) |
| Jul–Sep 2026 | £1,663 | +£22 (+1.3%) |
Ofgem Price Cap — Typical Annual Bill by Quarter (illustrative trend)
Who Is Covered by the Price Cap?
The cap applies to customers on a standard variable tariff (SVT) or default tariff — this covers the majority of UK households. You are covered if you pay by Direct Debit, standard credit, or have a prepayment meter, though the cap level differs by payment method.
| Payment Method | Typical Annual Bill (Jul–Sep 2026) |
|---|---|
| Direct Debit | £1,663 |
| Standard credit (cash/cheque/quarterly DD) | £1,772 |
| Prepayment meter | £1,597 |
The cap does not apply to fixed-rate tariffs. If you signed up for a fixed deal your rates are agreed with your supplier for the duration of the fix and will not change when the quarterly cap resets — for better or worse.
What the Price Cap Does Not Cover
- Business energy — the price cap only applies to domestic (household) energy. Business tariffs are unregulated
- Fixed tariffs — rates on fixed deals are set by your agreement, not the cap
- Your total bill — if you use more than the typical household assumption your bill will exceed the headline cap figure
- Exempt suppliers — Ecotricity, Good Energy and 100Green have permanent exemptions from the cap as green energy suppliers
Regional Variation
The cap sets averages across England, Scotland and Wales, but actual rates vary by distribution region. Electricity standing charges in particular vary significantly — from around £272 per year in London to around £366 per year in North Wales and Mersey at July 2026 rates. This is because the cost of transporting electricity to more remote or rural areas is higher. Your bill will reflect the rates for your specific region.
When Is the Next Cap Change?
The next cap, for October to December 2026, will be announced by late August 2026 and takes effect from 1 October 2026. Ofgem publishes the new cap level around six weeks before it takes effect, giving households and suppliers time to prepare.
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Frequently Asked Questions
What is the Ofgem price cap?
The Ofgem price cap is the maximum unit rate and standing charge energy suppliers can charge customers on a standard variable tariff. It does not cap your total bill — only the rates per kWh and per day.
What is the price cap for July to September 2026?
The cap is set at £1,663 per year for a typical dual fuel Direct Debit household — up 1.3% from £1,641 in the previous quarter. Electricity is 26.11p/kWh with a 57.19p/day standing charge. Gas is 7.33p/kWh with a 29.04p/day standing charge.
How often does the price cap change?
Every three months — in January, April, July and October. Ofgem announces the new level around six weeks ahead of each change. The October 2026 cap will be announced by late August 2026.
Does the price cap apply to my fixed tariff?
No. If you are on a fixed deal your rates are agreed with your supplier and do not change when the quarterly cap resets. The cap only applies to standard variable and default tariffs.
Will my bill definitely be £1,663 per year?
No. The £1,663 figure is based on typical household consumption of 2,500 kWh electricity and 9,500 kWh gas per year. If your usage differs your bill will differ. It is an illustration of what a typical household would pay at the capped rates — not a limit on your actual bill.
Why do rates vary by region?
Network costs — the cost of transporting energy to your home — vary by region. Rural and remote areas cost more to supply than urban areas, which is reflected in regional standing charges. The cap sets an average but your actual rates are for your specific distribution zone.
Summary
- The Ofgem price cap limits the unit rate and standing charge suppliers can charge on standard variable tariffs — not your total bill
- From July to September 2026 the cap is £1,663/year for a typical dual fuel Direct Debit household — up 1.3% from £1,641 the previous quarter
- Electricity is capped at 26.11p/kWh and gas at 7.33p/kWh — both including 5% VAT
- The cap is reviewed every three months and changes in January, April, July and October
- Fixed tariffs, business energy and three exempt green suppliers are not covered by the cap
- Rates vary by region — check your bill for the exact unit rates and standing charges that apply to your address
- To see exactly what your current unit rate is costing you use the Energy Unit Cost Calculator →