The energy price cap is an upper limit set on the cost of an average annual dual fuel (gas and electricity) bill that applies to customers on default tariffs or customers using prepayment meters.

Energy regulator Ofgem first introduced the cap in 2019, and its level is reviewed twice annually. There are actually two separate caps for default (standard variable) and prepayment tariffs – the prepayment cap tends to be slightly higher.

The cap is designed to provide a safety net to customers on pricey tariffs, especially the more vulnerable. The cap applies to the unit costs of energy, and the total figure Ofgem provide is based on an average household - your bill may end up higher if you use more energy.

The default tariff price cap for a typical dual-fuel household paying by Direct Debit is currently £1,755 per year for the period 1st October to 31st December 2025. 

For prepayment meter customers, the price cap is currently around £1,707 per year. 

These price cap levels are reviewed every three months, with the next update expected to be announced for the period starting 1st January 2026.

The main reason for the January 2026 price cap change, announced by Ofgem in November 2025, is the ongoing ups and downs in the wholesale energy market. Over the past few months, gas prices in particular have stayed higher than normal due to global supply pressures and seasonal demand, even though they’re no longer at the extreme levels seen back in 2022.

How is it worked out?

The price cap is based on how much it actually costs energy suppliers to buy gas and electricity on the wholesale market, along with other running costs like network and policy charges. It’s designed to protect customers from sudden price spikes, while still making sure suppliers can cover their costs.

Since 2023, Ofgem has reviewed the price cap every three months; in February, May, August, and November, with any changes taking effect at the start of the next quarter (April, July, October, and January). This more regular review helps the cap move in line with the real cost of energy, rather than lagging behind big shifts in the market.

If you are either on a default tariff or use a prepayment meter, your bills will almost certainly go up when the new price cap kicks in. Suppliers aren’t obliged to increase the cost of their tariffs along with the price cap, but in general they tend to do so.

If you are on a fixed rate tariff, your costs won’t directly be affected by the cap increase, but since fixed rate costs do change along with wholesale supply prices, you will probably find that when you come to renew your deal you’ll be paying more than before.

If you are not sure what kind of tariff you are on, think about how recently you switched to a new plan. If you can’t remember, it probably means you are on a standard variable tariff and it’s a good idea to switch to a new fixed rate plan before October.

The price cap does help to stop energy bills from constantly rising and getting out of control. Default or standard variable tariffs are invariably the most expensive way to pay for your energy supply by direct debit, and prepayment plans cost more still.

Despite switching being routinely promoted, lots of customers are still on default tariffs – disproportionately elderly customers, who are more likely to be classed as vulnerable. Prepayment meters are often installed for people whose credit rating stops them from being able to get standard credit meters. Ofgem’s price cap helps all of these customers.

The best way to protect yourself against sky high energy costs, however, is almost always to switch over to a new, cheaper deal altogether. A few suppliers, like Bulb, only offer variable rates, which are nonetheless cheaper than a lot of the competition, and some others, like Octopus, ensure a minimal difference in cost between their fixed rate and default plans. For others, it’s usually worth getting a fixed rate plan.