What is the Energy Price Cap?

The Energy Price Cap is set by the Energy Regulator, Ofgem, and is reviewed every three months. It was set up in 2019 and looks at the prices being paid in the wholesale market before setting a maximum (the cap) that an energy supplier can charge consumers for a unit of energy if they are not on a fixed contract. This enables consumers on standard variable, or the default tariffs, to have some prediction over what they will pay for the energy they consume.

However, the Energy Price Cap only restricts the maximum per unit pricing and has no influence on the monthly standing charge that a supplier can charge. Therefore, even if you reduce your power consumption, it is likely that some costs could continue to rise.

Since 2021, the Energy Price Cap has increased significantly as wholesale prices were hit by a number of global factors, most significantly the war between Russia and Ukraine (and Russia restricting its supply of gas to Europe as a result).

Whilst we saw another increase in the Energy Price Cap in January 2024, Ofgem announced in mid February that prices will drop in April this year, although this will not reduce to pre-Covid prices.

If you want to know why energy prices change so much read our blog here