The energy price cap and the Energy Price Guarantee schemes explained
The energy price cap aims to limit the bills of households on standard and default tariffs. We explain how it works together with the Government’s Energy Price Guarantee – and what you can now expect to pay.
The energy price cap aims to limit the bills of households on standard and default tariffs. We explain how it works together with the Government’s Energy Price Guarantee – 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 (SVTs), and customers who use prepayment meters. It was introduced in January 2019 to make sure consumers don’t pay more for energy 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.
From 1 January 2024, the energy price cap is set at an annual level of £1,928 for a dual fuel household paying by direct debit, based on typical consumption. This is a rise of 5% from the October price cap.
If you pay by cash or cheque, the price cap is £2,058, based on typical consumption. For customers on prepayment meters, it’s £1,960, based on typical consumption. Ofgem says the additional costs for these customers reflect the higher cost for energy companies to serve them.
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 fixed the maximum price you paid for a unit of gas or electricity, not the total amount of your bill.
The EPG set the amount that a typical UK household should be paying for energy at £2,500 a year. The guarantee was in place until June 2023.
The price that households pay for energy is based on whichever is lowest – the energy price cap or the EPG. The price cap is now lower than the £2,500 guarantee limit, so it sets the maximum price per unit of power that customers will pay.
The price cap should be applied automatically. There’s no need to contact your energy supplier unless you’re having problems paying. If someone contacts saying you need to claim the price cap or the price guarantee, it’s a scam and you should ignore them.
What effect will the changes to the price cap have on bills?
The average household energy bill will rise by £94 a year. This is due to rising international wholesale costs and market instability. Energy bills are still about double what they were before the energy price crisis began.
What is going to happen to my bills next winter?
Here’s how energy prices for a typical home might look over the next few months, based on predictions by industry analyst Cornwall Insight.
|
Energy price for typical home paid by Direct Debit (2,900 kWh electricity and 12,000 kWh gas per year) |
Previous energy price guarantee | Previous energy price cap | Current energy price cap | Announced energy price cap |
|---|---|---|---|---|
| Until 30 June 2023 | From 1 July 2023 | From October 2023 | January 2024 | |
| Price per month | £198.50 | £164.67 | £152.83 | £160.66 |
| Price per year | £2,500 | £2,074 | £1,834 | £1,928 |
Is £1,928 the maximum I will have to pay from January?
No, neither the energy price cap nor the Energy Price Guarantee are a limit on how much you’ll pay in total. Your total bill depends on:
- How much energy you use
- Where you live
- How you pay for your energy.
What is capped is the amount you’ll 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. And if you pay by cheque, cash or bank transfer when you get your bill, it could be cheaper if you switch to direct debit.
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 February, with any changes taking effect from 1 March 2024.
Ofgem chief executive Jonathan Brearley said:
‘It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills. We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap.’
What can I do if I’m struggling to pay my energy bill?
High 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.
First, 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 claim 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 cap will affect you depends 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, what you pay is likely to go down. You’ll find your bills get cheaper as energy providers cut prices, to reflect what they’re having to pay in the wholesale market. The new cap 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 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 your tariff details, 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.
What is average usage based on?
The average figure of £1,923 is based on a dual fuel household paying by direct debit, with a typical consumption of 2,700 kWh (kilowatt hours) of electricity and 11,500 kWh of gas. For electricity-only customers on Economy 7 paying by direct debit, the cap has decreased to £1,298 for a typical consumption of 4,200 kWh.
Ofgem works out 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 |
7,500 | 1,800 |
| Medium |
2-3 bedroom house 2-3 people |
12,000 | 2,900 |
| High |
4+ bedroom home 4-5 people |
17,000 | 4,100 |
Frequently asked questions
Do the Energy Price Guarantee and energy price cap apply to households using alternative fuels?
No, they apply only to gas and electricity.
Are fixed-term tariffs affected by the energy price cap?
The energy price cap doesn’t apply to fixed rate tariffs, but the price guarantee scheme does. Energy suppliers should adjust fixed tariffs automatically. Customers on fixed tariffs don’t 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 standard variable tariff, in which case you’ll be protected by the price guarantee.
If you’re not sure whether you’re eligible for the energy price cap, contact your supplier.
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