Energy price cap

What is the current energy price cap?

The energy cap updates every three months so it changes four times a year.

The current energy price cap is set at £2,074^[1] a year for the average household that uses both gas and electricity, and pays their bills by Direct Debit. This will change on 1 October 2023.

What will the energy price cap be in october 2023?

On 1 October 2023, the energy price cap is set to reduce to £1,923 per year.^[1] This will last until the end of December 2023 when a new energy price cap comes into effect on 1 January 2024.

Energy price cap for typical domestic consumption between July to December 2023

Who does the energy cap apply to?

The price cap applies only if you’re on a default energy tariff, often called a standard tariff or ‘standard variable tariff’ (SVT).

The price cap doesn’t apply if you’re on a fixed-term energy tariff or a standard variable green energy tariff that Ofgem has exempted from the cap.

Why is there an energy price cap?

The energy price cap was brought in to protect consumers from unfair pricing and makes sure that suppliers pass on only legitimate price rises as well as any drops in their costs to their customers.

In a similar way, it protects suppliers. A rise in the cap to reflect higher wholesale energy and supply prices allows suppliers to recover these costs. 

How is the price cap set?

The level the price cap is set at is based on what it costs companies to supply you with energy.

Mostly, that includes taking into account the market conditions in the wholesale energy market and what it costs suppliers to buy international oil and gas. When the cost of

wholesale energy increases or decreases, so does the price cap.

When Ofgem sets the cap it also takes into account network costs to build and run the pipes and wires to transport energy to you. These vary by region so there are different price caps for different areas.

The way you pay and the type of energy meter you have will also have a bearing on what your supplier charges you to meet the cap.

Suppliers can charge less than the set level of the cap, but not more.

Is the energy price cap the maximum I will pay?

The price cap only limits the unit rates and daily standing charge for your energy bills. This means that if you use more energy than the average UK household, then your energy bill will likely be higher than the price cap.

So, the energy price cap is not the maximum amount you'll pay for energy - the amount you pay also depends on how much gas or electricity you use.

How do I know if I’m on a default tariff?

If you’re not sure if you’re on a default tariff, then just ask your energy supplier.

You can also check your energy bill. If your energy bill has a contract end date, this means you’re on a fixed tariff. If not, then you’re on a default tariff.

What’s the impact of the energy price cap?

The energy price cap applies only if you’re on a default energy tariff (often called a basic tariff or ‘standard variable tariff’). This means that, depending on the costs of wholesale energy, your bills on this tariff can go up or down.

Some people on these tariffs mistakenly think that the price cap can protect them from rising costs in wholesale gas and electricity, but this is not the case. The cap is raised when there are hikes in wholesale costs.

A new cap rate was announced on 25 May 2023 to reflect the rise in energy prices over the last six months, with gas prices quadrupling in the last year.

This cap takes effect on 1 July, and will affect 29 million customers who will see energy prices fall for the first time in 18 months. Ofgem says that those on default tariffs paying by direct debit could see a £1,206 price drop, from £3,280 to £2,074. Prepayment customers will see a drop of £1,248 from £3,325 to £2,077.

Is the price cap cheaper than a fixed rate tariff?

It depends on the energy market.

Default tariffs vary in price throughout the year while fixed rate tariffs will charge you the same price throughout your yearly contract. This means that if the price of energy were to suddenly drop half way through your contract, you would still pay the previously agreed price for your energy and could end up paying a lot more than if you were on a default tariff.

The opposite is also true. If the price of energy were to jump, those on a fixed rate tariff could still pay a much lower price for their energy while those on a default tariff move to a higher cost in line with the price cap.

Am I able to switch supplier again?

Over the last few years, lots of people stopped switching energy suppliers as the price cap made default tariffs cheaper than most fixed rate tariffs energy suppliers offered.

This is still the case but you can switch energy suppliers at any time. Some providers are beginning to introduce fixed rate tariffs with affordable prices, so if you do want to switch energy providers to benefit from a better deal, go for it!

What can I do if I’m struggling to pay my energy bills?

If you need help paying your energy bills, then there are schemes and discounts available to help cover the costs. Here are some for you to consider.

There’s the Warm Home Discount Scheme which offers a one-off £150 discount for your electricity bill between September and March. This scheme is only available for those on a low income, get the Guaranteed Credit element of Pension Credit, or are eligible for certain benefits like PIP.

Those born on or before 26 September 1956 can qualify for one-off winter fuel payments ranging between £250 and £600. It’s tax-free and does not affect your benefits.

There are also cold weather payments available to those on certain benefits which are automatically paid into your bank account. If you think you qualify for this payment but are not already receiving it, contact your local pension centre or JobCentre Plus.

How can I save money on my energy bills?

There are lots of things you can do around your home to cut back on your energy usage and save money on your energy bills. Here’s some ideas for you to consider.

Turn off appliances left on standby. They’re still using energy and switching them off instead can cut down your energy usage. This can lead to cheaper chills. Some common appliances often left on standby include

• Televisions
• Computers and laptops
• Gaming consoles
• Kitchen appliances like coffee makers and microwaves

You can also turn down your thermostat by a degree or two to save energy. According to the Energy Saving Trust, you could save around 10% on your energy bill per year by doing this and you might not even notice a difference in your home.

Finally, try to energy-proof your home. This includes updating your appliances to make sure they use energy efficiently. They’re rated on an energy saving scale from A to G, and the more efficient an appliance is, the more you can save on your energy bill.