Last updated: May 2026
If you’ve watched the news at any point in the last four years you’ll have heard about the Ofgem price cap. Usually a single number, usually announced with a sigh of relief or a sharp intake of breath. The figure that gets reported is the annual cost for a “typical” household, and the way it’s framed makes it sound like the cap puts a ceiling on what you’ll actually pay. It doesn’t.
The Ofgem price cap caps the unit rate you pay for each kilowatt-hour of electricity and gas, and the daily standing charge for being connected to the grid. It does not cap your total bill. Use more energy, pay more.
This page covers the current figures up front, then explains how Ofgem actually calculates the cap, who it covers, and whether you should sit on it or look at something better.
Current Ofgem price cap (1 April to 30 June 2026)
| Current cap (1 Apr – 30 Jun 2026) | |
|---|---|
| Annual cost, typical Direct Debit dual fuel household | £1,641 |
| Electricity unit rate | 24.67p per kWh |
| Electricity standing charge | 57.21p per day |
| Gas unit rate | 5.74p per kWh |
| Gas standing charge | 29.09p per day |
| Change vs previous quarter | down £117 / 7% |
Figures are GB averages, include 5% VAT, and use Ofgem’s Typical Domestic Consumption Values of 2,700 kWh of electricity and 11,500 kWh of gas a year. Actual rates vary by region and payment method. Source: Ofgem price cap unit rates and standing charges.
The next cap (1 July to 30 September 2026) is due to be announced on 27 May 2026.
How the cap differs by payment method
The headline £1,641 only applies to Direct Debit. If you pay differently, your cap is different:
| Payment method | Annual cap (typical use) |
|---|---|
| Direct Debit | £1,641 |
| Prepayment meter | £1,597 |
| Standard credit | £1,772 |
Standard credit is most expensive because suppliers carry more cost in billing. Prepayment is cheapest thanks to a 2024 policy called levelisation, which uses a small charge on Direct Debit customers to keep prepayment standing charges lower.
What the price cap actually caps (and what it doesn’t)
The cap limits two things only: the maximum price per unit (in pence per kWh) and the maximum daily standing charge.
It does not cap your annual bill. The widely reported £1,641 is what a household using Ofgem’s typical amount of energy would pay. If your usage is higher, you’ll pay more. If you live in a small flat and barely use the heating, you’ll pay less.
The cap is a rate ceiling, not a spending ceiling. Worth saying clearly because it’s consistently misreported.
Who is on the price cap (and who isn’t)
Around 19 million UK customer accounts sit on a standard variable tariff (SVT) or default tariff and are protected by the cap. That covers roughly 6 million prepayment accounts, 8 million standard credit accounts, and several million Direct Debit customers whose fix has expired.
If you’re on a fixed-rate tariff, the cap doesn’t apply to you. You’re locked into whatever you signed up for until the contract ends. If you’re on a tracker tariff (like Octopus’s), you’re outside the cap mechanism entirely.
Worth noting: the cap only covers Great Britain. Northern Ireland has a separate regulatory regime under the Utility Regulator and the figures there don’t match.
How the Ofgem price cap is calculated
Ofgem builds the cap from the ground up, adding allowances for every legitimate cost a supplier faces, then applying VAT. For the 1 April to 30 June 2026 cap on Direct Debit, the breakdown looks roughly like this:
- Wholesale costs (~£652, ~40%): what suppliers pay on the wholesale market for gas and electricity. The biggest component and the one that swings the cap most, moving with global gas markets, geopolitics, weather, and demand.
- Network costs (~£463, ~28%): the wires, pipes, and infrastructure that get energy to your door. Up 17% from Q1 to Q2 2026, driven by Ofgem’s RIIO-3 price control settlements funding grid investment.
- Operating, debt and industry costs (~£274): supplier overheads. Billing, customer service, smart meter rollout, debt costs from unpaid bills.
- Policy costs (~£106): government schemes paid through bills, mostly the Warm Home Discount plus renewables support. This component dropped £130 in Q2 2026 because the government scrapped the ECO levy and moved some green levies into general taxation.
- EBIT (~£42): Earnings Before Interest and Tax, Ofgem’s allowance for supplier profit.
- Headroom (~£16): for uncertain costs Ofgem can’t otherwise pin down.
- Levelisation allowance (~£9): the charge on Direct Debit customers funding lower prepayment standing charges.
- VAT at 5% (~£78): applied on top.
Add it all up and you get £1,641. Full figures from Ofgem’s summary of changes to the April to June 2026 cap.
Why the cap changes every three months
Ofgem reviews and resets the cap on a quarterly cycle: Q1 January to March, Q2 April to June, Q3 July to September, Q4 October to December. Each cap is announced about a month before it takes effect. Wholesale gas is the main driver of quarterly movement. Until October 2022 the cap was reviewed every six months, but the energy crisis exposed how badly that lag worked and Ofgem moved to quarterly reviews.
Upcoming announcements: 27 May 2026 (for July–September), 26 August (for October–December), and 25 November (for January–March 2027).
A brief history of the price cap
The cap was introduced on 1 January 2019 to stop suppliers ripping off customers parked on default tariffs. For its first three years it sat in a narrow band of roughly £1,000 to £1,200. Then 2022 happened. Wholesale gas went vertical after the invasion of Ukraine, and by January 2023 the cap would have hit £4,279 if the government hadn’t stepped in with the Energy Price Guarantee, which capped what households actually paid at £2,500 from October 2022 to June 2023.
Today’s £1,641 is the lowest the cap has been since 2024, but still around 35% above where it was pre-crisis. The House of Commons Library has the full timeline and underlying data.
What it costs you in practice (worked example)
Using Ofgem’s TDCV assumptions of 2,700 kWh electricity and 11,500 kWh gas a year, Direct Debit, dual fuel:
- Electricity unit cost: 2,700 × 24.67p = £666
- Electricity standing charge: 57.21p × 365 = £209
- Gas unit cost: 11,500 × 5.74p = £660
- Gas standing charge: 29.09p × 365 = £106
- Total: ~£1,641 a year
The split between gas and electricity is closer than people expect (around £875 electricity, £766 gas), because while gas is much cheaper per unit, you use a lot more of it for heating.
Standing charges (the bit no one likes)
Daily standing charges are a fixed cost you pay regardless of whether you use any energy. A dual-fuel Direct Debit customer pays around £315 a year in standing charges before they switch a single appliance on.
This is the part of the cap that attracts the most heat, and fairly. Standing charges hit low users hardest in percentage terms. If you’ve insulated, switched to LEDs, and are trying to cut consumption, your reward is that the standing charge becomes a bigger share of your bill.
Almost 60% of the electricity standing charge in Q2 2026 covers network costs. The transmission element alone jumped 65% from Q1 to Q2 to fund National Energy System Operator investment in the grid. Charges also vary by region, with rural areas tending to be highest. Ofgem’s plan to require suppliers to offer at least one low-standing-charge tariff keeps getting pushed back.
Regional and payment method variation
The £1,641 headline is a GB average. Actual rates depend on where you live and how you pay. For electricity, North Wales and Mersey tend to have the highest unit rates and standing charges, London tends to be lowest. The same Direct Debit cap can vary by £100 or more across regions in real terms.
On payment method, Direct Debit or prepayment is cheapest, standard credit most expensive. If you’re on standard credit and could move to Direct Debit, that’s one of the simplest savings going without changing supplier.
Should you stay on the price cap or switch?
Sitting on the cap is fine if you genuinely don’t want to engage with the energy market. You won’t get ripped off. The cap is a safety net.
But it’s a safety net, not a deal. Fixed tariffs and trackers can sit well below the cap, sometimes £100 to £200 a year for typical usage. The decision comes down to three options:
- Stay on the cap if you value simplicity above all. You won’t pay more than the regulated rate. The trade-off is you’re paying a price ceiling rather than a competitive rate.
- Fix if you want price certainty for a year. Worth doing if the fix is priced below the cap, which most are at the moment.
- Switch to a tracker if you’re comfortable with prices moving day to day. Octopus’s tracker has consistently undercut the cap in most months. The catch is on bad days, prices can be higher than the cap, and you don’t get a year of certainty.
For the practical steps, our best UK energy suppliers guide and how to switch energy supplier explainer cover the basics. For below-cap pricing, Octopus’s tracker is the obvious starting point. [Octopus Referral Link]
What’s changing in the cap going forward
April 2026 reforms. The Warm Home Discount funding has moved from standing charges to unit rates. The Energy Company Obligation (ECO) levy has been scrapped from bills entirely, and some green levies are moving into general taxation. Net effect for most households: lower bills, with the saving showing up in unit rates rather than standing charges. The government estimated around £150 off a typical bill.
Standing charge reform. Ofgem’s plan to require suppliers to offer at least one low-standing-charge tariff is still on the table but keeps slipping.
Q3 2026 cap. Forecasters are flagging upward pressure on the next cap, partly from rising wholesale costs since February 2026 driven by Middle East tensions affecting global gas supply. We’ll know on 27 May.
Common misconceptions
- “The price cap caps my bill.” No. It caps the unit rate and standing charge.
- “I’m on a fix so I’m protected by the cap.” You’re not on the cap at all. You’re locked into your contract.
- “Prepayment is always cheaper.” Only on standing charges, and only because of levelisation. Direct Debit is usually cheapest overall once switching deals are factored in.
- “If the cap goes up, my supplier has to raise prices.” No. Suppliers can charge less than the cap and many do.
- “Switching means losing cap protection.” Depends what you switch to. Fixed deals replace cap protection with a contract. Trackers sit outside the cap entirely.
FAQ
What is the current Ofgem price cap? £1,641 a year for a typical dual-fuel household paying by Direct Debit, covering 1 April to 30 June 2026.
How is the Ofgem price cap calculated? Ofgem adds allowances for wholesale costs, network costs, operating costs, policy costs, supplier profit, headroom, levelisation, and 5% VAT. Wholesale costs are the biggest component and drive most quarterly changes.
When does the price cap change next? The next cap, for 1 July to 30 September 2026, will be announced on 27 May 2026.
Does the price cap apply to my bill? If you’re on a standard variable or default tariff, yes. If you’re on a fix or a tracker, no.
Why is my bill higher than the £1,641 figure? Because £1,641 assumes 2,700 kWh of electricity and 11,500 kWh of gas a year on Direct Debit at average regional rates. Higher usage is the most common reason for a higher bill.
Is it worth switching off the price cap? For most households, yes. Fixed deals and tracker tariffs frequently sit below the cap.
What’s the price cap for prepayment meters? £1,597 a year for typical dual-fuel use, covering 1 April to 30 June 2026.
Does the price cap cover Northern Ireland? No. The cap applies in Great Britain only.
Bottom line
The Ofgem price cap is a safety net. It stops suppliers charging whatever they like to customers who haven’t engaged with the market. That matters. But it’s not a target to aim for, and the headline figure isn’t what most households actually pay.
If you’ve been parked on the cap for a year or more, run the numbers. A 20-minute look at a fixed deal or a tracker tariff usually finds savings. Our energy bills guide and how to reduce your energy bills cover the practical stuff. For a below-cap option, Octopus’s tracker has been undercutting the cap in most months. [Octopus Referral Link]
The cap is doing its job. That doesn’t mean it’s the best deal you can get.