What is the energy price cap, who sets it and how does it work?

A new energy price cap has been announced, and demonstrates how much you would have been paying for energy without the Energy Price Guarantee in place

What is the energy price cap and how does it work?

With energy prices still dominating headlines, many will be wondering what is the energy price cap and how does it affect their bills (opens in new tab).

The energy price cap was introduced on 1 January 2019 to limit how much your energy supplier could charge you per kWh of energy usage. Since it was introduced, the figure has gone up and down. In April 2022, as a result of the energy crisis, it rose to its highest level so far. 

There are multiple, complex reasons why energy prices are going up (opens in new tab), and families have been worrying about how much their energy bills will cost (opens in new tab) when prices rose again.   

It has been announced that the cap is to rise again in January 2023 where households would see average energy bills rise to £4,279 for typical use, giving an indication to families of what they could be paying for their energy if the Energy Price Guarantee (opens in new tab) were not in effect.

Dr Craig Lowrey (opens in new tab), Principal Consultant at Cornwall Insight said: “The Energy Price Guarantee (EPG) will shield consumers from the January price cap of £4,279 announced by Ofgem, however the rise will be concerning to the government, who will be shouldering the billions of pounds needed to compensate suppliers the difference."

What is the current energy price cap?

The energy price cap has been temporarily replaced by the Energy Price Guarantee and currently stands at £2,500. It came into force on 1 October 2022. This means the average maximum rates will be 10.3p per kilowatt hour (kWh) for gas, and 34p per kWh for electricity. 

The energy price cap is set to increase to £4,279 per year in January 2023 based on typical use (and for those paying by direct debit). The average maximum per kWh rate for gas would have increased to 17p and the maximum per kWh rate for electricity would have risen to 67p. 

However, the Energy Price Guarantee will prevent this from happening. When it was first announced, the Energy Price Guarantee was going to be in place for two years. But new Chancellor Jeremy Hunt confirmed on 17 October 2022 that it will now only be in place at it's current level until April 2023. In his Autumn Statement on 17 November, Jeremy Hunt announced that the Energy Price Guarantee will remain in place for an additional 12 months, but at a higher level of £3,000. 

The stated figure is calculated as an average across the UK, but the price cap actually varies by region and how people pay their bill. Customers who pay by standard credit (cash or cheque) pay more based on the higher cost for energy companies to serve them.

The overall figure is also based on typical use - if you use more energy than the typical household, you will pay more than the cap.  

Since the energy price cap was introduced, most suppliers have set their default tariff prices very close to the maximum cap rate.

To help families cope with these rising prices, the Government announced the £400 energy rebate (opens in new tab) for almost all households which will be applied to energy bills from October 2022.  A further £900 cost of living payment (opens in new tab) for low income households was also announced in the Autumn Statement and will be paid in instalments to qualifying households in 2023 and 2024.

But two groups campaigning against the cost of living crisis, and sky-high energy prices in particular, Enough is Enough (opens in new tab) and Don't Pay UK (opens in new tab), argue that this is not enough to help the most vulnerable families through the winter months. 

See how much your energy bills will cost should there be more price cap changes by using our calculator below.

Just before the price cap changed in April, households were encouraged to submit a meter reading (opens in new tab) to their supplier, to make sure they weren't charged the new rate for energy that was actually used on the previous rate. Those without a smart meter (opens in new tab) should make sure to submit their meter reading before any future price cap changes. 

Who sets the energy price cap?

Up until recently, the energy price cap has been calculated and set by Ofgem, the energy regulator. It was introduced on 1 January 2019 to limit how much your energy supplier could charge you per kWh of energy usage.

However, given the energy crisis and demands for further assistance to help struggling families and businesses, the government has introduced a new price cap, called the Energy Price Guarantee, which replaces the one set by Ofgem. Ofgem will still announce it's energy price cap at various points throughout the year, but says "the energy price cap level indicates how much consumers on their energy supplier’s basic tariff would pay if the EPG [Energy Price Guarantee] were not in place." 

The price cap sets a limit on what your supplier can charge you per unit of energy you use, making sure customers always pay a fair price. It also limits how much profit your supplier can make. It takes into account the wholesale price of gas, which has been soaring, which is why it has risen so much in 2022. 

The price cap used to be reviewed every six months. And earlier in the summer, it was announced that it would be reviewed every three months instead to more accurately reflect wholesale energy prices. Former Prime Minister Liz Truss then announced that the new £2,500 cap would be fixed for two years, while she works to resolve supply issues and bring energy prices back down to affordable levels. 

But new Chancellor Jeremy Hunt (opens in new tab), has confirmed that the £2,500 level of the price guarantee will be in force until April 2023, at which point the level will rise to £3,000 for 12 months. Should wholesale energy prices drop dramatically in that time, those price cuts should be passed on to households. 

Does the energy price cap apply to me?

The energy cap (whether the energy price cap or the Energy Price Guarantee) applies to anyone who is on a standard or default tariff. The standard tariff is the supplier's variable tariff, which can go up and down at any point in the year at the supplier's discretion. If you did not choose a tariff, then you are on a default tariff.  It also applies to those with prepayment meters.  

The cap is also based on average use - so, you may pay more (or less) for your energy than the price cap depending on how much energy you use, and how you pay your bill. Paying by direct debit is cheaper than paying by cash or cheque.

If you are still on a fixed rate energy deal, where the price of your energy is locked at a set rate for a certain period, then the energy cap does not apply to you until your contract ends. A fixed contract is anything between 12 months to two years.

When the energy crisis began, many suppliers removed any fixed rate deals from the market as there were no good deals to be had. If your fixed rate deal came to an end, you will have been moved on to your suppliers standard tariff. 

The energy crisis has also seem multiple energy suppliers go bust. But the good news is, if your energy supplier goes bust (opens in new tab), you won't lose your supply, you'll be moved to another provider automatically. 

How have energy price caps increased over time?

The energy price cap was £1,137 when it was introduced in January 2019 and now stands at £2,500 under the Energy Price Guarantee. The price guarantee will rise to £3,000 in April 2023.  

The price cap has gone up and down during this time period. It was £1,137 from January to March 2019, and then from April 2019 to September 2019 it was set at £1,254. It went down to £1,179 for October 2019 to March 2020, and then down again, to £1,126, for April 2020 to September 2020. From October 2020 to March 2021 the price cap was set at its lowest ever level of £1,042.

Wholesale energy prices started to increase at the beginning of 2021 as the world emerged from lockdown. In February 2021, it was announced that from April 2021 the cap level would increase by 9% to £1,138. The price cap then went up to £1,277 in October 2021 – the highest level until the announcement that the cap has risen to £1,971 from April 2022.

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January 2019 - March 2019£1,137Row 0 - Cell 2
April 2019 - September 2019£1,254UP £117
Oct 2019 - March 2020£1,179DOWN £75
April 2020 - September 2020£1,126DOWN £53
October 2020 - March 2021£1,042DOWN £84
April 2021 - September 2021£1,138UP £96
October 2021 - March 2022£1,227UP £89
April 2022 - September 2022£1,971UP £694
October 2022 - March 2023£2,500UP £529
April 2023 - March 2024£3,000UP £500

How to find out if you’re on a price-capped tariff

You can find out if you are on a price-capped tariff by looking at your energy bill or online energy account. It's usually on the first page under the 'My tariff' section. (Our new guide is really useful if you need your energy bill explained (opens in new tab) to help you understand what all the information means). You might have chosen a standard tariff when you picked your supplier, or you might have been put on a standard tariff if you moved house. If you were previously on a fixed tariff and didn’t take any action when it ended, you would have been automatically moved to your supplier’s standard tariff. If your supplier went bust and you were moved to a new supplier, you would have been put on its standard variable tariff. With around 30 energy suppliers shutting down since the summer of 2021, hundreds of thousands of customers will fall into this category. These suppliers went bust because the price cap forced them to sell energy at a massive loss.

If you're not sure who your new supplier is, here's a list of the suppliers that have gone bust and the suppliers their customers have been moved to.

Customers of Bulb Energy may be concerned since it announced its insolvency. But a Special Administrator has been appointed to run Bulb, which will continue to supply energy to its customers as normal.

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Old supplierNew supplier
Ampoweruk LtdYü Energy (opens in new tab) from 7 November 2021
Avro EnergyOctopus Energy (opens in new tab) from 26 September 2021
Bluegreen Energy Services LimitedBritish Gas (opens in new tab) from 7 November 2021
CNG Energy LimitedPozitive Energy (opens in new tab) from 7 November 2021
Colorado EnergyShell Energy (opens in new tab) from 17 October 2021
DaligasShell Energy (opens in new tab) from 17 October 2021
ENSTROGAE.ON Next (opens in new tab) from 3 October 2021
Entice EnergyScottish Power (opens in new tab) from 1 December 2021
GOTO EnergyShell Energy (opens in new tab) from 21 October 2021
Green Network EnergyEDF (opens in new tab) from Sunday 31 January 2021
Green Supplier Limited ('Green.')Shell Energy (opens in new tab) from 27 September 2021
Hub EnergyE.ON Next (opens in new tab) from 13 August 2021
Igloo EnergyE.ON Next (opens in new tab) from 3 October 2021
MA Energy LimitedSmartestEnergy (opens in new tab) from 7 November 2021
MoneyPlus EnergyBritish Gas (opens in new tab) from 11 September 2021
Neon Reef LimitedBritish Gas (opens in new tab) from 21 November 2021
Omni Energy LimitedUtilita (opens in new tab) from 7 November 2021
Orbit Energy LimitedScottish Power (opens in new tab) from 1 December 2021
People's EnergyBritish Gas (opens in new tab) from 19 September 2021
PFP EnergyBritish Gas (opens in new tab) from 11 September 2021
Pure PlanetShell Energy (opens in new tab) from 17 October 2021
Simplicity EnergyBritish Gas Evolve (opens in new tab) from 31 January 2021
Social Energy Supply LtdBritish Gas (opens in new tab) from 21 November 2021
Symbio EnergyE.ON Next (opens in new tab) from 3 October 2021
Together Energy Retail LtdBritish Gas (opens in new tab) from 24 January 2022
Utility PointEDF (opens in new tab) from 18 September 2021
Whoop EnergyYü Energy Retail Limited (opens in new tab)
Xcel Power LtdYü Energy Retail Limited (opens in new tab)
Zebra Power LimitedBritish Gas (opens in new tab) from 7 November 2021
Zog Energy LimitedEDF (opens in new tab) from 4 December 2021

Source: Ofgem

Can I change my price cap tariff for a fixed deal?

Normally, the advice from energy experts is to fix your energy tariff as this generally results in a lower bill than being on a default tariff. But soaring wholesale prices mean energy companies can’t afford to offer cheap fixes anymore. Most fixed tariffs are considerably more expensive than the price cap, if they are offered at all.

Justina Miltienyte (opens in new tab), energy policy expert at Uswitch.com, said: "For most people it’s probably best to stay on your supplier’s default tariff for now, unless you are already locked into a fixed deal. It’s important to keep an eye on the market and be ready to fix a new deal as and when they become available.”

But with the energy bill freeze set to come into force on 1 October 2022, those who have fixed at a higher rate will see their unit prices reduced by 17p per kWh for electricity and 4.2p per kWh for gas. Your tariff will be adjusted automatically, so you don't need to do anything - your energy supplier will take care of it. 

If you're looking to save money on your energy bills, check out our tips on how to save energy in homes (opens in new tab), as well seeing if you could benefit from cheaper electricity at night (opens in new tab)

What should I do if I can’t afford to pay my energy bills?

If you can’t afford your energy bills, you’re not alone and help is available. In the first instance, speak to your energy supplier. They may be able to help create a more suitable payment plan or offer you support through one of their hardship funds. 

If that doesn’t prove enough, then there is other help with energy bills (opens in new tab) that is available.  

Personal finance expert Adam French says: “If you do find yourself struggling to pay your energy bills, my advice is to contact your energy provider and talk to them about a payment plan. If you are eligible, you can speak to them about getting on their Priority Services Register - so if you are a pensioner, pregnant or have young children, if you are disabled or have communications needs, contact your supplier. Being on that register means that energy suppliers have to offer affordable payment plans and can also offer emergency credit if you can’t afford to top up a prepay meter. 

“But at all costs, do not cancel your direct debit, or stop paying energy bills. This will not only leave your energy account in debt – a debt which will have to be paid, it could possibly affect your credit history as your account will be in arrears and you could also end up with a court summons from your energy provider, it may also lead to future utility providers not allowing you to pay your bills by Direct Debit.” 

Adam added: “There is some help out there for householders, and it’s worth checking to see if you’ve claimed everything that you’re entitled to as some people will be eligible for up to £1,500 support from the government – as an example, those on low incomes are entitled to a £650 one-off payment. My advice is to keep paying what you can, keep talking to your supplier and keep campaigning to your MP for something to be done, as it cannot continue as it is.”

You could also see if you qualify for free gas and electric vouchers (opens in new tab) to help you cover the cost of high energy bills.

Emma Lunn

Emma Lunn is a multi-award-winning journalist who specialises in personal finance and consumer issues. With more than 18 years of experience in personal finance, Emma has covered topics including mortgages, first-time buyers, leasehold, banking, debt, budgeting, broadband, energy, pensions and investments. Emma’s one of the most prolific freelance personal finance journalists with a back catalogue of work in newspapers such as The Guardian, The Independent, The Daily Telegraph, the Mail on Sunday and the Mirror.

With contributions from