What is the Energy Price Cap?

In 2019, the government introduced the Energy Price Cap in response to rising energy costs. And in October 2022, the Energy Price Guarantee (EPG) was launched to further protect households from high gas and electricity bills.

Read more about the Energy Price Guarantee.

Since October 2022, the annual energy bill for a typical household using gas and electricity (paying by direct debit) has been limited to £2,500 by the EPG, but from July 2023, the EPG cap reverted to £3,000. The EPG will remain in place until April 2024.

This means that the Energy Price Cap covering the period from October to December is now the lower of the two, reducing the maximum energy bill for a typical household in England, Scotland and Wales to £1,834 a year.

The Energy Price Cap sets a limit on the amount energy companies can charge per unit of energy, but it’s worth noting that it’s not a limit on energy bills overall.

The cap is calculated by the regulator, Ofgem, and is updated every three months. This is to make sure it’s in line with inflation, and other changing costs. From April to June 2023, the Energy Price Cap was set at £3,280. But due to falling wholesale gas prices, the cap has been reduced to £1,834 a year from October to December.

Does the Energy Price Cap affect me?

If you’re on a fixed tariff for your energy supply, then you won’t be affected by the price cap. The Energy Price Cap is applied if you’re on a default energy, or standard variable tariff. It sets a maximum price that energy suppliers can charge for every kilowatt hour (kWh) of energy used.  

If you’re on a default tariff, it’s important to note that it doesn’t cap your entire energy bill. Instead, it puts an upper limit on the amount you can be charged per unit of gas or electric. Ofgem estimates that around 26 million people benefit from the Energy Price Cap. 

How is the Energy Price Cap set? 

The Energy Price Cap is based on a typical domestic user with medium energy usage. Ofgem estimates that typical means two or three people living in a two- to three-bedroom home, using 2,990 kWh of electricity, and 12,000 kWh of gas each year. 

When the cap is calculated, things like wholesale energy prices, and the cost of the government’s other energy-related schemes, are taken into account.

However, the amount that’s calculated is just a guide, to show how the cap could affect a typical annual bill. Every household’s bill will be different based on the amount of energy used.

Examples of household energy use

Energy Use	Example – type of home and number of residents	Typical annual gas use (kWh)	Typical annual electricity use (kWh)
Low	Flat or 1-bed house; 1-2 people	8,000	1,800
Medium	2-3 bed house; 2-3 people	12,000	2,900
High	4+ bed home; 4-5 people	17,000	4,300

So, how much are my energy bills likely to be?

You’ll always pay for the energy you use, regardless of what the Energy Price Cap is set at.

How much you’ll pay also depends on how energy-efficient your home is, and which appliances you use – and how often you use them.

How do I know how much energy I’m using? 

Your latest energy bill should show your monthly usage and the estimated amount you use per year. You can also find this on a smart meter if you have one. 

Energy usage varies enormously depending on the size of your property and your usage of appliances, as well as the energy-efficiency rating of your home.

You can get an estimate of how much electrical appliances cost to run and compare energy costs for different appliances here.