The energy price cap and the Energy Price Guarantee schemes explained
The government’s Energy Price Guarantee scheme aims to limit the bills of households on standard and default tariffs. We’ll explain how the guarantee scheme works together with changes to the energy price cap – and what you can now expect to pay.
The government’s Energy Price Guarantee scheme aims to limit the bills of households on standard and default tariffs. We’ll explain how the guarantee scheme works together with changes to the energy price cap – and what you can now expect to pay.
What is the energy price cap?
The energy price cap limits the amount energy companies can charge customers who are on default tariffs, including standard variable tariffs (SVT), and customers who use prepayment meters. It was introduced in January 2019 to make sure consumers don’t pay more than they should.
The cap rate, which is set by the UK’s energy regulator Ofgem, puts a limit on the amount energy companies can charge customers per kilowatt-hour (kWh) of electricity and gas.
Ofgem has lowered the cap from the current £4,279 a year to £3,280 for the average household paying by direct debit, effective from 1 April 2023. If you pay by cash or cheque, the price cap is £3,482 and for customers on prepayment meters it’s £3,325. The regulator said the reduction of almost £1,000 for average homes reflects recent falls in wholesale energy prices.
What is the Energy Price Guarantee?
The government introduced the Energy Price Guarantee (EPG) as a temporary additional measure on 1 October 2022 to deal with significant increases in the price of wholesale gas. The EPG fixes the maximum price you will pay for a unit of gas or electricity, not the total amount of your bill.
The EPG means that a typical UK household should be paying £2,500 for energy a year. The guarantee is continuing at the same level until June 2023.
From 1 July 2023, the EPG will also be used to help compensate customers on pre-payment meters for the higher cost of their energy compared with direct debit customers. This means from 1 July a typical customer on a pre-payment meter will pay the same amount as an equivalent customer paying by direct debit until 31 March 2024, saving around £45 a year on their energy bill.
The price households pay for energy is based on which is lowest – the energy price cap or the EPG. But as the price cap is still higher than the £2,500 guarantee limit, customers won’t pay as much as they would if the EPG was not in place.
You don’t need to apply for the EPG and there’s no need to contact your energy supplier unless you’re having problems paying. If someone contacts you to tell you to claim the price guarantee, it’s a scam and you should ignore it.
What effect will the changes to the price gap and the price guarantee have on bills?
Despite the decrease in the price cap and the continuation of the Energy Price Guarantee, domestic energy bills are still set to rise as current levels of government’s support for households becomes more limited and the £400 energy rebate scheme ended in March 2023.
Changes to the price guarantee will also mean that customers on prepayment meters will pay the same per unit as customers paying by direct debit from 1 July 2023 , rather than paying more as they have done in the past.
Is £2,500 the maximum I will have to pay?
No, neither the Energy Price Cap nor the Energy Price Guarantee are a limit on how much you will pay in total. Your total bill depends on:
- How much energy you use
- Where you live
- How you pay for your energy.
What is actually capped is the amount you will pay for each unit of gas or electricity you use. If you use more than the average based on a medium use household, you’ll pay more.
What is average usage based on?
The average figure of £2,500 is based on a dual fuel household paying by direct debit with a typical consumption of 2,900kWh (kilowatt hours) of electricity and 12,000kWh of gas. For electricity-only customers on Economy 7 paying by direct debit, the cap has decreased to £2,293 for typical consumption of 4,200 kWh.
Ofgem calculates the energy price cap based on these calculations:
| Energy use | Example – home type and number of residents | Typical annual gas use (kWh) | Typical annual electricity use (kWh) |
|---|---|---|---|
| Low | Flat or 1-bedroom house 1-2 people |
8,000 | 1,800 |
| Medium | 2-3 bedroom house 2-3 people |
12,000 | 2,900 |
| High | 4+ bedroom home 4-5 people |
17,000 | 4,300 |
Does the energy price guarantee apply to households using alternative fuels?
No, but other government help has been put in place.
Households in England, Scotland and Wales living in park homes, care homes, on heat networks, off grid or using alternative fuels such as heating oil or biomass in their homes, who haven’t received help automatically can now apply for £400 in support. See who is eligible for the Energy Bills Support Scheme Alternative Funding and apply online.
All households in Northern Ireland should receive a one-off payment of £600 to help with their energy bills. This will combine £400 worth of support from the Energy Bills Support Scheme Northern Ireland (EBSS NI) and £200 under the Alternative Fuel Payment (AFP) scheme for off-grid fuel, like LPG or heating oil. Payments under the scheme started being sent out in January 2023.
The Alternative Fuel Payment will be available to all households in Northern Ireland, not just those who use off-grid fuel.
How do I know if I’m on a default tariff?
You’re likely to be on a default tariff if you haven’t switched energy suppliers before or you’ve automatically rolled on to the standard variable rate after your fixed rate tariff came to an end. You’re also likely to be on the standard tariff if your supplier stopped trading and you were switched to a new supplier.
When will the energy price cap next change?
The next Ofgem price cap will be announced towards the end of May with any changes taking effect from 1 July 2023.
Ofgem chief executive Jonathan Brearley said: "If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower. However, prices are unlikely to fall back to the level we saw before the energy crisis."
What can I do if I’m struggling to pay my energy bill?
Increases in energy prices alongside general rises in the cost of living are making it difficult for many people to afford to pay their bills. But help is available. Firstly, you should talk to your supplier. They must discuss payment plans and tell you what support is available.
There are also charitable schemes you can apply to for help. Get details of where to apply and more in our guide: what to do if you can't afford your energy bills.
Government support is also available – see help with energy bills available grants and schemes to make sure you have got everything you’re entitled to.
Using less energy
Another way to keep your bills in check is to use less power if you can. See these sources of help for making your home more energy efficient:
What does the Energy Price Guarantee mean for me?
Whether the changes to the Energy Price Guarantee will affect you will depend on what tariff you’re on. If you’re on a fixed tariff that doesn’t expire before the end of the price guarantee, your tariff shouldn’t change.
But if you’re on a default or standard variable tariff, this is likely to increase as prices rise. You’ll find your bills get more expensive as energy providers are expected to introduce price increases to these tariffs, to reflect what they’re having to pay in the wholesale market. But the new guarantee means the unit price of gas or electricity can’t rise above the set level.
If your fixed tariff runs out during the period of the cap, you’re likely to be switched to the standard variable tariff or offered another fixed price tariff at a much, much higher rate – so your bill is likely to increase either way.
Your tariff details can be found on your latest bill or in your online account. If you can’t find one, call your supplier to check what tariff you’re on. If you’ve never switched from one energy provider to another, or haven’t switched for a while, it’s likely you’re on a default or standard tariff.
What you pay also depends on where you live and how you pay. There are different rates depending on the region your live in. See the regional rates on GOV.UK for January-March 2023 and for April-June 2023.
There are some consumers who aren’t eligible for the price guarantee because they’re on a district heating network. This typically applies to blocks of flats where there’s a communal heating system in operation, with the building owner choosing the heating supplier. Park homes are also treated differently so haven’t had prices capped so far. The good news, if you’re in this situation, is that the government has promised that you will be no worse off than other types of households and will receive support through a new fund.
How do the energy price cap and the Energy Price Guarantee work?
The energy price cap puts a ceiling on the amount that suppliers can charge you for each kilowatt-hour (kWh) unit of gas and electricity you use, and sets a maximum daily standing charge. The standing charge covers the cost your energy supplier takes on to supply your home with electricity and gas.
Suppliers can't charge you more than the cap Ofgem sets and Ofgem monitors suppliers to make sure their default tariff rates comply.
The Energy Price Guarantee puts a cap on the unit price of gas and removes green levies from household bills. The price you pay per unit will be based on which is lowest – the price cap or the Energy Price Guarantee.
The important thing to remember is that neither the energy price cap nor the Energy Price Guarantee cap the total cost of your energy bill. It only limits the rates you can be charged for what you use. The actual amount you’ll pay depends on how much energy you use, so you could end up paying more, or less, than the level of the cap. What you pay also depends on the kind of meter you have. If you’re on a prepayment meter, your unit cost will typically be higher than for direct debit.
Here you can see how the unit rates have increased in the last two years:
| Average price cap unit rates Customer with typical usage, paying by direct debit** |
|||
|---|---|---|---|
| Power type | Price cap period (1 April-30 September 2022) |
Price guarantee (1 October 2022 to 31 March 2023 (SVT)) | Price guarantee (1 April 2023 to 30 June 2023 (SVT)) |
| Electricity | 28p per kWh Daily standing charge: 45p |
34p per kWh Daily standing charge: 46p |
33.2p per kWh Daily standing charge: 50.4p |
| Gas | 7p per kWh Daily standing charge: 27p |
10.3p per kWh Daily standing charge: 28p |
10.3 per kWh Daily standing charge: 27.7p |
**All prices excluding VAT. Rates are averages and will vary by region, payment method and meter type. See the regional rate for your area or contact your supplier for personalised information.
Are fixed-term tariffs affected by the energy price guarantee?
The Energy Price Cap didn’t apply to fixed rate tariffs, but the price guarantee scheme does.If you’re on a fixed tariff at a higher rate than the price set by the Energy Price Guarantee – known as the floor price - your unit prices will be reduced as follows:
- Up to 16.6p/kWh for electricity and 2.2p/kWh for gas from April to June 2023
- Up to 31.8p/kWh for electricity and 6.4p/kWh for gas from January to March 2023
- Up to 17p/kWh for electricity and 4.2p/kWh for gas for October to December 2022.
However, if you start with very high rates your unit price may still be above the EPG rates.
Energy suppliers should adjust fixed tariffs automatically. Customers on fixed tariffs do not need to take any action to get the benefits of this scheme.
If your fix comes to an end before switching becomes possible again, you may be switched to the SVT, in which case you’ll be protected by the guarantee there.
If you’re not sure whether you’re eligible for the energy price cap, contact your supplier.
Frequently asked questions
Who benefits from the energy price cap?
The price cap and the Energy Price Guarantee are designed to stop people having to pay unexpectedly large amounts for their energy, especially the most vulnerable in society, those who aren’t on a fixed tariff and those who remain with their new supplier after their previous supplier exited the market.
Prices are capped for people who:
- Use prepayment meters for their energy
- Have the government’s Warm Home Discount and/or
- Are on a standard variable tariff (SVT) or a default tariff.
Are fixed-term tariffs affected by the energy price guarantee?
The energy price cap didn’t apply to fixed rate tariffs, but the price guarantee scheme does.
If you’re on a fixed tariff at a higher rate caused by recent energy price rises, your unit prices will be reduced by 17p/kWh for electricity and 4.2p/kWh for gas.
Energy suppliers should adjust fixed tariffs automatically. Customers on fixed tariffs do not need to take any action to get the benefits of this scheme.
If your fix comes to an end before switching becomes possible again, you may be switched to the SVT, in which case you’ll be protected by the guarantee there.
If you’re not sure whether you’re eligible for the energy price cap, contact your supplier.
Will the price cap be displayed on my energy bill?
Whether the price cap will be shown on your energy bill depends on your supplier. But suppliers must always let you know in advance if your tariff is increasing or changes will leave you worse off.
Will I benefit from the guarantee if I am paying for my energy as part of my rent?
The Energy Price Guarantee is applied per unit of gas or electricity used for households with a domestic electricity connection, so will be applied if your landlord has a domestic electricity contract with a licensed electricity supplier.
Your landlord may be reselling the electricity to you based on your usage, in which case:
- They must comply with the maximum resale price rules which say they must not make a profit
- The maximum resale price for electricity is currently set at the same price as that paid by the person reselling it (see Ofgem’s guidance on ensuring customers are being charged no more than they should).
Your landlord may charge an ‘all inclusive’ rent, where a fixed cost for energy usage is included in your rental charges, in which case:
- They are encouraged to come to an agreement with you on the Energy Price Guarantee in line with the arrangement in your tenancy agreement
- The landlord’s fixed charge may already provide you with similar protection from the impact of energy price increases.
How long will the Energy Price Guarantee last?
The current Energy Price Guarantee is set at £2,500 until the end of June when it will be reviewed. The scheme is set to last until April 2024.
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