Energy Guide · 2025
UK Energy Price Cap Explained 2025
The Ofgem Default Tariff Cap controls how much UK energy suppliers can charge customers on standard variable tariffs. For Q2 2025, a typical dual-fuel household pays around £1,738/year. But the cap is widely misunderstood — it caps unit rates and standing charges, not your total bill. This guide explains everything you need to know.
How the Price Cap Works
Introduced in January 2019 to protect customers from being overcharged on default tariffs, the Ofgem price cap consists of two components:
- Unit rate (pence per kWh) — what you pay for each unit of energy used
- Standing charge (pence per day) — daily fixed fee to be connected to the grid
The cap sets maximum values for both. Suppliers can charge less but not more. Q2 2025 cap (typical levels):
| Fuel | Unit rate (p/kWh) | Standing charge (p/day) |
|---|---|---|
| Electricity | ~27.03p | ~53.80p |
| Gas | ~6.99p | ~32.67p |
These are averages — actual rates vary by region (14 different cap levels across Great Britain). Verify with your supplier or at ofgem.gov.uk for current exact figures.
Who Does the Cap Apply To?
- Customers on standard variable tariffs (SVT) — the default tariff most suppliers put you on when a fixed deal ends
- Customers on prepayment meters
- ~28 million households (about 80% of GB households)
The cap does NOT apply to:
- Fixed-rate tariffs (you\'re locked into the agreed rate for the term)
- Time-of-use tariffs like Octopus Agile (use real-time wholesale prices)
- Smart tariffs for EVs, heat pumps, solar etc.
- Northern Ireland (has its own regulator, the Utility Regulator)
- Business / non-domestic customers
Why “Typical Bill” Is Misleading
Headlines often quote “the price cap is now £1,738” — but this is the bill for a household with very specific assumptions:
- 2,700 kWh electricity per year
- 11,500 kWh gas per year (combi boiler heating)
- Direct debit payment method
- Dual fuel with one supplier
Your actual bill depends entirely on your actual usage. A small flat with electric heating only might pay £600/year. A 5-bed house with poor insulation might pay £3,500. Check your annual statement for your real kWh totals.
How the Quarterly Review Works
Ofgem recalculates the cap every quarter based mainly on wholesale energy prices over the preceding ~6 months. Components:
- Wholesale costs (~50% of bill)
- Network costs (transmission, distribution — ~20%)
- Policy costs (renewable subsidies — ~10%)
- Operating costs (supplier overheads — ~10%)
- VAT (5% — reduced rate on energy)
- Other (bad debt provision, EBIT margin etc.)
Suppliers must give 30 days\' notice before changing prices, and Ofgem publishes announcements ~7 weeks before each quarter starts.
Should I Fix or Stay on the Cap?
Use this logic:
- If a fixed deal is <5% over current cap: consider fixing for stability
- If a fixed deal is at or below current cap: usually a no-brainer (lock in)
- If wholesale prices are falling fast: cap will drop next quarter — staying on cap may save
- If you have an EV or heat pump: consider time-of-use tariffs (Octopus Go, Intelligent Octopus)
- Vulnerable customers: check if you qualify for Warm Home Discount or Cold Weather Payment first
14 UK Regional Cap Variations
Energy regions (slightly different to administrative regions) have different unit rates. Generally:
- Cheaper regions: London, East Midlands, Yorkshire
- Average regions: South East, Eastern, West Midlands
- More expensive: North Scotland, Merseyside & N Wales, South West
- Highest: North Scotland (high distribution costs, low population density)
The difference between cheapest and most expensive region can be £100–£200/year for the same usage. You cannot choose a region — it\'s determined by your address.