What the cap actually caps
The price cap sets a maximum on two things for default tariffs:
- The unit rate — the most you can be charged per kWh of gas or electricity.
- The standing charge — the fixed daily fee you pay just for being connected.
It does not cap your total bill. The famous annual figure (recently £1,723) is just what a “typical” household using an average amount would pay — your bill depends on your actual usage.
How it's set
Ofgem reviews the cap every quarter and sets it based on wholesale energy costs, network charges, policy costs and a margin for suppliers. When wholesale prices spike, the cap follows a few months later — which is why bills can jump even though you haven't changed anything.
What to do when it changes
- Take a meter reading on the day the new cap starts, so you're not charged the new rate for old usage.
- Check whether fixed deals have appeared below the cap — that's your signal to consider fixing.
- Review your direct debit: suppliers often raise it after a cap increase, sometimes more than needed.
- If you're on a fixed tariff already, the cap doesn't affect you until the fix ends.
The standing charge problem
Part of every cap announcement is the daily standing charge — the bit you pay even if you use nothing. It varies by region and payment method, and it's a big reason two households with identical usage can pay different amounts. When comparing tariffs, always look at the standing charge alongside the unit rate.
Frequently asked questions
What is the energy price cap?
It's the maximum amount suppliers can charge per unit of gas and electricity, and as a daily standing charge, on default tariffs in England, Wales and Scotland. It's set by the regulator Ofgem.
Does the price cap limit my total bill?
No — this is the biggest misunderstanding. The cap limits the rate you pay per unit, not your total. Use more energy and your bill goes above the headline figure; use less and it comes in below.
How often does the price cap change?
Every three months — in January, April, July and October. Ofgem announces the new level a few weeks before it takes effect.
Should I fix my energy tariff or stay on the price cap?
It depends on the market. When fixed deals are priced below the cap, fixing can save money and give certainty. When they're above it, the capped variable tariff is usually the better bet. Compare before your fix ends.
Keep reading
Related: the fixed daily fee, and how much it quietly adds up to.