The Ofgem price cap determines the maximum you can be charged for unit rates of gas and electricity, along with the standing charges for grid connection
Energy bills will see a slight increase this winter following Ofgem's announcement of its new price cap.
The typical annual household energy bill is expected to rise by 0.2% starting in January. This increase is surprising, as analysts had anticipated a slight decline in energy bills.
Ofgem projects that households with average energy consumption, paying by direct debit, will experience an annual bill increase from £1,755 to £1,758.
The price cap for those paying via pre-payment meter is increasing from £1,707 to £1,711, and the yearly charge for consumers paying upon receipt of bill will rise from £1,890 to £1,894.
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The new price cap is 2% or £37 lower compared to the same period earlier this year, but bills are still significantly higher than they used to be.
However, there is no absolute cap on the amount you can pay for energy. The price cap simply limits how much you can be charged for unit rates of gas and electricity, as well as standing charges.
This implies your energy bill still depends on your gas and electricity usage. The price cap adjusts every three months in January, April, July, and October.
The new price cap becomes effective on January 1 and will remain until March 31, when it will be adjusted again by Ofgem. It applies to households.
Ofgem stated that wholesale prices are currently stable and had decreased by 4% over the past three months, although conditions remain “volatile”.
The regulator attributed the price cap increase to government policy costs and operational expenses, including costs associated with the Sizewell C nuclear project and the Warm Home Discount scheme.
Tim Jarvis, Director General, Markets, at Ofgem, said: “While energy prices have declined in real terms over the last two years, we acknowledge consumers might not feel the impact financially.
“The price cap helps shield households from being overcharged for energy. However, it's just a safety measure, and there are practical ways for customers to reduce their energy costs.
“Examine various tariffs to select the best option for you or switch your payment method to direct debit or smart pay-as-you-go. Prepayment remains the most economical payment method, with these customers already saving about £47 on average.
“Even though wholesale energy costs are stabilizing, they still constitute the most significant part of our bills, leaving us vulnerable to fluctuating prices.
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“That’s why we’re collaborating with the government and industry to enhance clean energy and reduce dependence on uncontrollable international sources.”
Minister for Energy Consumers Martin McCluskey commented: “We are aware that energy bills are still excessively high. Therefore, we are taking immediate measures, with millions more families benefiting from a £150 deduction on their bills due to the expanded Warm Home Discount scheme this winter.
“We are committing to long-term strategies to achieve permanent reductions in bills through the government’s clean power initiative. We’re ushering in our new nuclear era, providing cheaper, clean electricity to power millions of homes, stimulate economic growth, and create thousands of jobs.”
What is the Ofgem price cap?
The Ofgem price cap determines the maximum you can be charged for unit rates of gas and electricity, plus the standing charges for grid connection.
As a result, your bill can be higher or lower than the primary price cap figure. This primary price cap number reflects what the average bill payer can expect to pay for energy over a year.
Unit rates differ by region, meaning where you live can also affect your bill. There are also varying rates for prepayment customers and those paying on receipt of bills.
While the price cap represents a yearly bill, it is updated every three months to reflect fluctuating wholesale energy prices. Previously, it was changed every six months.
What are the unit rates and standing charges?
The average unit rate for electricity is increasing from 26.35p per kilowatt hour (kWh) to 27.69p per kWh. The standing charge for electricity is rising from 53.68p a day to 54.75p a day.
The average unit rate for gas is decreasing from 6.29p per kilowatt hour (kWh) to 5.93p per kWh, while the standing charge is increasing from 34.03p a day to 35.09p a day.
These figures are representative of the average direct debit bill across England, Scotland, and Wales. There are distinct unit rates and standing charges for prepayment customers and those who pay on receipt of bills.
Who is on the Ofgem price cap?
You are on the Ofgem price cap if you are on a standard variable rate (SVR) energy tariff. This rate fluctuates along with changes to the price cap.
Typically, you are on an SVR tariff if you haven’t signed up for a fixed energy deal, where you agree to specific prices for unit rates and standing charges for a designated period.
More than 30 million households in England, Scotland, and Wales, including those on pre-payment meters and other standard variable arrangements, are covered by the energy price cap.
How does Ofgem calculate its price cap?
Ofgem considers various factors when calculating its forthcoming price cap. The largest cost component within the price cap is wholesale energy, which reflects the cost energy suppliers pay for gas and electricity.
The assessment period for wholesale energy prices for the April 2025 price cap ranged from August 19, 2025, to November 17, 2025.
Other considerations by Ofgem include the expenses related to maintaining pipes and wires, network and operational costs, VAT, and energy supplier profits.
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