What is the Energy Price Cap?

Last updated: October 1, 2024

In 2019, the government introduced the energy price cap in response to rising energy costs. It 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.

On account of rising energy costs, the price cap has risen by 1.2% for the period January – March 2025, to £1,738. This is an increase of around £21 per year for the average household. The price cap for October – December 2024 was set at £1,717.

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.

Take a look at what the average UK energy bill looks like, as well as ways to save.

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.