The Energy Price Cap explained: what it is and what it means for your bill

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Quick answer

The energy price cap is a limit set by Ofgem on the unit rate and daily standing charge that suppliers in England, Scotland and Wales can charge customers on standard variable (default) tariffs. It does not cap your total bill: the more energy you use, the more you pay. For 1 October to 31 December 2026, the average Direct Debit cap is 26.32p per kWh for electricity with a 54.83p daily standing charge, and 7.97p per kWh for gas with a 29.68p daily standing charge.

What the price cap is (and isn’t)

Ofgem, the energy regulator for Great Britain, sets the cap every three months. It applies if you’re on a default tariff and pay by Direct Debit, standard credit (paying when you get a bill), prepayment meter, or an Economy 7 meter. If you’re on a fixed tariff, your rates are set by your contract and the cap doesn’t change them.

The most common misunderstanding is the headline “typical bill” figure. Ofgem itself says the cap “does not limit the cost of your total bill”. The cap limits the price per unit and the standing charge. A household that uses more energy than average will pay more than the headline number, and a smaller household will pay less.

Northern Ireland has a separate energy market and isn’t covered by the Ofgem cap.

The cap for 1 October to 31 December 2026

These are the Great Britain averages for Direct Debit customers, published by Ofgem on 26 August 2026:

	Electricity	Gas
Unit rate	26.32p per kWh	7.97p per kWh
Standing charge	54.83p per day	29.68p per day
VAT included	0% (VAT removed 1 Oct 2026 to 31 Mar 2027)	5%

And here’s how the typical annual bill changed by payment method:

Payment method	July to September 2026	October to December 2026	Change
Direct Debit	£1,663	£1,723	4%
Standard credit	£1,796	£1,861	4%
Prepayment	£1,620	£1,678	4%
Economy 7 (Direct Debit)	£1,039	£1,046	1%

Ofgem says these typical bills use its 2026 Typical Domestic Consumption Values: 2,500 kWh of electricity and 9,500 kWh of gas a year, and 3,400 kWh for multi-register meters such as Economy 7. Rates also vary by region, so check Ofgem’s unit rates page for your area.

Why did it go up?

Ofgem says the main reason was higher wholesale costs. The wholesale allowance rose by 11% and now makes up 47% of the cap, driven mainly by the conflict and instability in the Middle East affecting gas prices. The VAT cut on electricity offset part of the rise.

Where does the money go?

Ofgem’s breakdown of the October to December 2026 Direct Debit cap:

• Wholesale energy (including contracts for difference): 47%
• Networks (the pipes and wires): 24%
• Operating, debt and industry costs: 17%
• Policy costs: 6%
• Supplier earnings allowance: 2.7%
• Headroom: 1%
• Levelisation allowance: 0.5%
• VAT: 5% on gas, 0% on electricity

How to work out your own bill

You only need two things: your annual usage in kWh (on your bill, in your supplier’s app, or on your annual statement) and the rates for your region.

Annual cost = (kWh used × unit rate) + (365 × standing charge)

Here’s the typical household worked through at the Direct Debit averages:

	Electricity	Gas
Annual usage	2,500 kWh	9,500 kWh
Usage cost	2,500 × 26.32p = £658.00	9,500 × 7.97p = £757.15
Standing charges	365 × 54.83p = £200.13	365 × 29.68p = £108.33
Total	£858.13	£865.48

That comes to about £1,724, matching Ofgem’s £1,723 once rounding is allowed for. Swap in your own usage to see your figure. Remember the cap rates can change every quarter, so this is an annualised snapshot, not what you’ll pay over the next 12 months.

Standing charges matter more than you think

Standing charges are paid every day whether you use energy or not. At the current averages, that’s about £308 a year for a dual fuel home before you boil a kettle. Low users, such as people living alone in a small flat, often find standing charges are a big share of their bill. Ofgem has moved to require suppliers to offer tariffs with lower standing charges, but those come with higher unit rates, so they only help if you use relatively little energy. Ask your supplier what’s available and do the sum above with both sets of rates.

When does the cap change next?

The cap is updated every three months. Ofgem says the cap for 1 January to 31 March 2027 will be announced on 25 November 2026. You’ll see plenty of forecasts before then, but treat them as estimates until Ofgem publishes the real figures.

Your supplier should tell you before your rates change. If you pay by Direct Debit, check whether your monthly payment is being adjusted and that it’s sensible for your actual usage.

What you can do about it

• Use less, especially in winter. Our guide to saving money on energy bills this winter covers heating settings and quick fixes.
• Check fixed deals. Fixed tariffs aren’t affected by the cap. Compare the fixed unit rates and standing charges against the cap rates, and check exit fees.
• Look at time-of-use options if you can shift electricity use. Ofgem notes some suppliers offer cheaper electricity at certain times, such as weekends.
• Claim the help you’re entitled to. The Warm Home Discount, Winter Fuel Payment and Cold Weather Payment are separate from the cap. See our guide to who gets what this winter.
• Talk to your supplier early if you can’t pay. Ofgem says suppliers must help if you ask, for example with a repayment plan or emergency credit.

Simple gadgets can help you see where energy goes. Browse plug-in energy monitors on Amazon or smart radiator thermostats if you want more control. Check compatibility with your heating system before buying.

Sources

• Ofgem: Changes to energy price cap between 1 October and 31 December 2026
• Ofgem: Summary of changes to energy price cap, 1 October to 31 December 2026 (PDF)
• Ofgem: Energy price cap unit rates and standing charges
• Ofgem: Energy price cap explained
• Citizens Advice: Grants and benefits to help you pay your energy bills