📚 This is a plain-English definitions guide. All figures and rules are drawn from Ofgem official sources. This is not financial advice — see the disclaimer below.
The energy price cap is one of the most talked-about things in UK household finance — and also one of the most misunderstood. The biggest misconception: it doesn’t cap your total bill. Here’s what it actually does, in plain English.
The energy price cap sets a maximum unit rate that energy suppliers can charge you for gas and electricity, and a maximum standing charge. Your total bill still depends on how much energy you actually use — there is no limit on that.
Think of it like a maximum price per litre of petrol. The cap controls the price per unit, not how many units you use. A larger home or a family that uses more heating will always pay more than a smaller household, even if the cap is the same.
Ofgem (the Office of Gas and Electricity Markets) is the UK’s energy regulator. It sets the price cap and reviews it every three months based on wholesale energy prices on global markets. When gas prices spike — as happened after Russia’s invasion of Ukraine — the cap rises. When wholesale prices fall, the cap follows.
Ofgem sets maximums for:
The cap applies to customers on standard variable tariffs — the default tariff most people are on if they’ve never switched. If you’re on a fixed-price deal, the cap doesn’t affect you until that deal ends.
Your annual bill is roughly:
(electricity unit rate × electricity units used) + (electricity standing charge × 365) + (gas unit rate × gas units used) + (gas standing charge × 365)
Ofgem publishes a ‘typical household’ figure based on average usage — that’s the headline number you see reported in the news. But your actual bill will be higher or lower depending on your home and usage.
Ofgem reviews and resets the price cap every three months:
Each change is announced roughly six weeks in advance. FinanceSimply covers every announcement the morning it’s confirmed.
The price cap only applies to customers on standard variable tariffs. Energy suppliers also offer fixed-rate tariffs where the unit rate is locked for a set period, regardless of Ofgem cap changes. Whether a fixed tariff costs more or less than the cap depends on the rates available at the time and how the cap moves during the fixed period.
Ofgem publishes guidance on energy tariff types at ofgem.gov.uk. The government’s energy-saving advice, including information on insulation schemes and efficiency measures, is published at gov.uk/improve-energy-efficiency.
Ofgem announces cap changes every quarter. FinanceSimply covers each one the morning it happens — what it means for your bills, in plain English.
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