What is the Energy Price Cap?

The Energy Price Cap, introduced by OFGEM in 2019, is designed to combat unfair price rises. With more and more people falling into fuel poverty, action had to be taken. The price cap is exactly what you might expect. A limit on the amount an energy supplier can charge for the supply of that energy.

OFGEM will look at the market twice per year, in April and October. At these points the Energy Price Cap will be raised or lowered in accordance with market conditions. In April 2020, it was £1126. At the beginning of October 2020, the price cap dropped to £1043, providing a saving of £83 for some households. If you are on a prepayment deal, your price cap is now £1070.

Does the Energy Price Cap affect everyone?

No. The energy regulator, OFGEM, only applies the price cap to an energy suppliers default tariff. This is usually the more expensive variable tariff, so many customers will be below this limit. If you have a new £83 saving on your energy bills, then you are using your energy supplier’s highest tariff. Take this as an opportunity to compare deals, switch and save even more cash.

If you have a fixed rate tariff, you shouldn’t need to worry. This is because the fixed rate should already be far lower than the price cap. When your fixed contract ends your suppliers, variable tariff will take effect. This will almost certainly be more expensive than your fixed deal.

If you wish to remain on the cheapest possible deal, it is important to manage your energy deals closely and make sure you don’t allow your fixed deal to lapse. The switching process should begin two months before your current deal ends. This means there is no need to allow your energy account to roll onto a variable deal.

Understanding the Energy Price Cap

First and foremost, it is important to understand that the quoted annual £1043 cap is a guide. The information assumes a typical home usage and shows an example of average energy usage. It is actually the cost per unit of energy (KWh) that has been capped. This means that if your household energy consumption is higher than average, you could end up paying much more than £1043 per year.

This also stands with regards to prepayment meters. The quoted cap of £1070 is referring to typical use. If you are a heavy energy user, then you will find that your annual energy costs will be higher than that.

Although the current trend is for the energy regulator to lower prices when possible, this will not always be the case. If you are on an affected tariff, you should not expect your bills to continue falling. If OFGEM decides that the price cap should increase, your bills will rise with it.

Does the price cap work?

When it comes to those on energy suppliers default tariffs, the Energy Price Cap is a positive step. Many households are yet to take advantage of the quick switching process and are vulnerable to price rises. The price cap ensures that any rises will be fair and incremental. The cap also ensures that when wholesale savings are made by the energy suppliers, customers do not miss out.

So, when it comes to customers on many of today’s variable deals, the answer is yes. The price cap can stop bills from getting out of hand and becoming disproportionate to market conditions. When it comes to the rest of the market, the Energy Price Cap has had little or no effect. Any fixed term contract needs to be well below the price cap level to remain competitive. This means anybody that regularly compares energy deals should never come near the limits dictated by OFGEM.

What about prepayment customers?

As previously mentioned, the price cap also affects prepayment meters. Again, the figure (£1070) shows the maximum yearly cost of a typical household with typical energy usage.

If the price cap falls, you do not need to apply for the savings. Your energy supplier must automatically lower its prices. The Price cap is perhaps more important for prepayment customers as there are generally less tariffs to choose from.

The cap does not always apply to smart meters. A prepayment smart meter that allows you to switch between prepayment and billed supply is ineligible. If you are unsure if this applies to you, check your meter or get in touch with your energy supplier.


Hi, I'm Rob and I run Energy-Review.co.uk. I initially started this project 5 years ago when I was looking to switch energy suppliers and found there wasn't a website that provided simple, data backed reviews on all the suppliers available. Since then, I spent have a lot of time (too much some may say!) looking at all publicly available data about each supplier and writing reviews using this information. These reviews are updated as regularly as possible and any data is backed up by a source where necessary. I have also started writing guides on various energy related topics which hopefully you will find useful. If you find any issues, please use our contact form to let us know.

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