What is the energy price cap and how does it work?
We explore exactly what the energy price cap is, how it's calculated, and how it affects UK energy bills.
Written byMelody Abeni
What's in this guide?What's in this guide?The energy price cap: at a glance
⚡ The energy price cap limits what suppliers can charge for gas and electricity
🏠 The annual figure is just an estimate based on typical usage
❌ The price cap doesn’t apply to fixed deals or time of use tariffs
📍 Rates also vary depending on where you live in the UK
🗓️ Ofgem reviews the cap every three months to reflect changing costs
Set by Ofgem, the energy price cap limits what suppliers can charge you per unit of gas and electricity, offering some protection against soaring wholesale costs.
In this article, we’ll break down the energy price cap, who it applies to, and its impact on at least 20 million household budgets.
If you’re concerned about rising energy bills, solar can help. Just answer a few quick questions below and we’ll provide you with an estimate of how much you could save with a solar & battery system.
What is the energy price cap?
In January 2019, the UK government (through its energy regulator Ofgem) implemented a price cap to prevent energy suppliers from overcharging households on default tariffs.
The cap addressed growing concerns about energy affordability after years of rising bills and limited competition in the market.
The energy price cap sets a maximum unit rate for electricity and gas, as well as a maximum daily standing charge (a fixed fee for maintaining your connection to the grid). However, it doesn't limit the total amount you pay, as this is determined by how much electricity and gas you use.
Ofgem reviews the price cap every three months to reflect changing costs.
Who does it apply to?
The energy price cap applies to households on default tariffs, also known as standard variable tariffs. These are the tariffs you’re put on automatically by suppliers if you haven’t chosen a fixed-price deal, or if your fixed deal has ended.
As of October 2024, 74.3% of UK domestic electricity customer accounts (around 20 million households) were on default tariffs, according to Ofgem. If you're on a default tariff, you're covered by the price cap regardless of how you pay for your energy. This includes:
- Standard credit: Paying your bill after receiving it (e.g. monthly or quarterly)
- Direct Debit: Paying automatically from your bank account, often at a discounted rate
- Prepayment meter: Paying in advance for energy using a top-up system
- Economy 7 (E7) meter: Paying different rates for electricity depending on the time of day/night
The price cap doesn't apply to smart time of use tariffs, green tariffs, or fixed-price deals, which can be higher or lower than the cap depending on market conditions.
What is the energy price cap based on?
You might have seen the April 2025 price cap described as £1,849 per year, but it’s important to note that this isn’t necessarily the maximum you’ll pay - this is just an average, based on Ofgem's view of ‘typical’ annual energy consumption.
According to Ofgem, this is 2,700 kilowatt-hours (kWh) of electricity and 11,500kWh of gas for a two- or three-bedroom household on a dual-fuel tariff.
The below table shows how the energy price cap changes based on different payment methods. Paying by Direct Debit is the most common method, hence why the £1,849 figure is the one that the press focusses on.
| Payment method | Energy price cap, April-June 2025 |
|---|---|
| Direct Debit | |
| Standard credit | |
| Prepayment meter | |
| Economy 7 (Direct Debit) |
The current energy price cap unit rates
Whenever a new energy price cap is announced, everyone wants to know what they’re going to be paying.
The annual figure (e.g. £1,849 in April 2025) provides a rough sense of what you might pay if you live in a two- or three-bedroom household, but for a more accurate picture, it’s better to focus on the unit rates for gas and electricity.
The rates vary depending on your payment method. You'll usually get the best rates if you pay by Direct Debit, as there are additional costs from suppliers for paying with other methods.
Here are the unit rates for the April 2025 energy price cap:
| Unit rate, April-June 2025 | Standing charge | |
|---|---|---|
| Electricity | ||
| Gas |
Your actual annual bill will depend on how much energy you use, so if you use more than 2,700kWh of electricity and more than 11,500kWh of gas, your bill will be higher than £1,849.
The standing charges, however, are fixed costs for all grid-connected homes, regardless of how much energy they consume. This charge covers the cost of maintaining the energy network and other fixed costs.
To learn more, check out our guide to standing charges.
Energy price cap unit rates by region
The energy price cap unit rates also vary depending on where you live in the UK. Regional energy prices fluctuate based on supply, demand, the cost of local network upgrades, and the distance that energy needs to travel to reach your home.
The table below provides an indication of how electricity unit rates differ across the UK. For a full list of unit rates and standing charges by region, visit Ofgem’s website.
| Region | Electricity unit rate, April-June 2025 |
|---|---|
| North West | |
| Yorkshire | |
| London | |
| South East | |
| North Wales and Mersey | |
| Northern Scotland |
If you’re concerned about rising energy bills, consider solar panels, which are a tried and tested way of cutting them down. In fact, there are almost 1.5 million homes in the UK with solar panels.
On average, you could save 86% on your electricity bills with a solar & battery system.
This figure is based on a sample of over 150 systems installed by Sunsave across England and Wales in 2024. The average system is 6.1kWp, with 54% of solar electricity used at home and 46% exported to the grid.
If you would like to find out how much a solar & battery system could save you, answer a few quick questions below and we’ll provide you with an estimate.
How is the energy price cap calculated?
Ofgem calculates the energy price cap using a complex formula that factors in nine different elements, plus 5% VAT.
Here's what determines the cap:
- Energy wholesale costs: The cost that suppliers pay for gas and electricity on the wholesale market
- Unexpected temporary cost adjustments: Costs from unforeseen events, like extreme weather or market disruptions
- Network costs: The cost of maintaining and operating the energy grid infrastructure
- Supplier operating costs: The day-to-day costs of running an energy supply business
- Government social and environmental schemes: Costs related to government initiatives
- Earnings Before Interest and Taxes (EBIT) allowance: A margin for suppliers to make a reasonable profit
- Uncertain costs and risks: A buffer for unpredictable costs, such as market volatility
- Payment uplift: The extra costs associated with customers who pay by methods other than Direct Debit
- Levelisation allowance: A mechanism to ensure fair distribution of costs between suppliers and customers
What causes the energy price cap to change?
Since its introduction in 2019, the price cap has been most influenced by wholesale energy costs, which are highly volatile because of supply disruptions and seasonal demand variations.
Wholesale costs are the most unpredictable component of the cap, and suppliers usually pass these fluctuations directly onto consumers. This was especially apparent in the 2021-2023 energy crisis, with global gas prices skyrocketing because of supply chain issues and geopolitical instability.
Between January and April 2025, the energy price cap rose significantly for several reasons.
First, wholesale costs increased by 11%, adding £86 to the cap (from £755 to £841), which was in turn caused by a cold winter, a lack of wind (meaning low output from wind turbines), and Russia suspending gas flows to Europe.
Second, policy costs rose by 6%, adding £11 to the cap (from £187 to £198). This increase stemmed from new charges, including the Network Charge Compensation scheme, higher Renewable Obligation allowances, and rises in the Green Gas Levy and ECO allowance.
The other cause of the price cap increase was inflation, which as of January 2025 was at 3.9% - its highest level since January 2024. Inflation affects the cost of operating energy networks and suppliers' day-to-day expenses, which are reflected in the price cap.
To get a sense of the bigger picture, check out our detailed guide to long term energy bill forecasts.
How has the energy price cap changed over time?
The energy price cap has significantly changed over time, largely due to global events like Russia's invasion of Ukraine in 2022, which affected wholesale energy prices and dramatically increased the cap.
The cap reached its peak in winter 2023, hitting £4,279 for a typical household, but homes were protected from this by the Energy Price Guarantee (EPG), which put a £2,500 limit on bills.
The EPG ended in April 2024, and the cap began to fall as wholesale prices stabilised. That said, it's still far above pre-crisis levels; as of early 2025, the energy price cap is £760 higher than when it was first introduced in 2019.
Energy price cap, 2019-2025
Is there any government help for households?
There are a few options for people struggling with high energy bills - though some of these come with strict eligibility criteria, so you'll need to contact your energy supplier to confirm if you qualify.
The government will be continuing the Warm Home Discount Scheme, which gives eligible households a cash boost to cover the cost of their energy bills. If you qualify, your energy supplier will automatically lower your bill by £150, so you'll save money in the colder months.
You may also qualify for Cold Weather Payments or the Winter Fuel Payment, depending on your age and circumstances.
Ofgem has also recently opened a consultation on introducing a tariff without a standing charge, which will make things fairer for homes that don't use much energy. Plus, the regulator has extended the debt allowance to help suppliers support customers.
Alternatively, installing solar panels is another way to reduce your energy bills. Solar panels generate free electricity during daylight hours, which means you’ll import far less from the grid, and you’ll also get paid for any excess energy via the Smart Export Guarantee.
And if you’re put off by the high upfront cost of solar panels, consider Sunsave Plus, which is the UK’s first solar subscription, and it means you can switch to solar with no upfront cost. Instead, you’ll pay a fixed monthly fee, and your system will also be protected by the Sunsave Guarantee for the full term.
Curious about how much you could save with a solar & battery system? Just answer a few quick questions below and we’ll provide you with an estimate.
The energy price cap: FAQs
What is the energy price cap in the UK?
The energy price cap in the UK limits what energy suppliers can charge per unit of gas and electricity for households on default or prepayment tariffs.
It's designed to protect consumers from excessive costs, but it doesn't cap total bills, which depend on usage.
How long is the energy price cap in place?
Ofgem reviews and sets the energy price cap every three months.
The cap reflects changes in wholesale energy costs and other factors, ensuring fair pricing for households on default or prepayment tariffs.
There is no indication that the energy price cap will be removed any time in the foreseeable future.
Why is electricity so expensive in the UK?
Electricity is expensive in the UK chiefly because of the marginal cost pricing system.
This is where the wholesale price of electricity is determined by the cost of producing the last unit of electricity required to meet demand, which is almost always produced by gas power plants with high marginal costs.
Despite significant investment in renewable electricity generation across the country, gas prices heavily influence electricity costs, especially since the UK imports much of its gas.
Written byMelody Abeni
Based in London, Melody is a specialist green technology writer who has been covering sustainability, climate action and ESG for the past five years, after gathering operational experience in green investing and financial services. She has written for various industry publications, including renewable technology advisor The Eco Experts, and she holds a Master’s degree in law from Birkbeck University.