Ofgem price cap explained

The energy price cap is one of the most talked-about numbers in UK energy, and one of the most misunderstood. It does not cap your bill. It does not guarantee you a specific annual cost. What it does is set a maximum rate that suppliers can charge per unit of energy and per day of standing charge on their default tariff.

For Q2 2026 (April to June 2026), Ofgem’s direct-debit cap is set at £1,641 per year for a typical dual-fuel household. That figure is a usage example, not a ceiling on your personal bill. The GB average capped rates are 24.7p/kWh for electricity and 5.7p/kWh for gas, with standing charges of 57.2p/day for electricity and 29.1p/day for gas. Your own capped rates can vary by region, payment method and meter type.

What the price cap actually is

Ofgem, the energy regulator, sets maximum unit rates for electricity and gas, and maximum daily standing charges. These apply to the standard variable tariff (also called the default or “out of contract” tariff) that customers end up on if they don’t actively choose something else.

The cap is reviewed and updated every quarter: January, April, July and October. Ofgem calculates it from wholesale energy costs, network charges, policy costs, operating costs, debt allowances, VAT and other regulated inputs. A fall in the headline cap does not always mean wholesale prices have fallen by the same amount. In the April to June 2026 cap, Ofgem’s published breakdown shows government policy costs falling sharply while network costs rose.

The “typical household” figure

Every time the cap is updated, the news reports a headline figure like “energy price cap set at £1,641 per year”. This number assumes a “typical” dual-fuel household that uses 2,700 kWh of electricity and 11,500 kWh of gas annually, paying by monthly direct debit.

If you use more than that, your bill will be higher than the headline figure. If you use less, it will be lower. The cap limits the rate per kWh and per day, not the total you can be charged. A household that uses 20,000 kWh of gas will pay substantially more than one that uses 8,000, even though both are on the capped tariff.

This is the biggest misconception. When people say “my bill is higher than the price cap”, they usually mean their bill is higher than the headline figure. That doesn’t mean their supplier is overcharging. It means they use more than the assumed average.

How Octopus relates to the cap

Octopus’s Flexible tariff is its standard variable tariff. Its rates are normally set close to the Ofgem cap and move when the cap changes. It is the fairest Octopus tariff to compare with the headline cap because both are default-tariff style prices.

The smart tariffs work differently:

Agile is not priced from the cap. Rates move with the wholesale market every half hour. Some slots can be above a cap-style unit rate, while others can be much lower. Agile also has its own 100p/kWh maximum import rate for extreme spikes. It can suit households that can shift or automate usage, but it is not a simple cap discount.

Tracker follows a daily wholesale-linked formula plus a fixed margin. Some days may be above a cap-style unit rate and some may be below. It is best judged over your own usage pattern rather than by one good or bad day.

Go and Intelligent Go use a cheap overnight or smart-charging rate alongside a higher day rate. They can work well for EV households that move a meaningful share of use into the cheap window. They can disappoint if most electricity use stays in the day.

Cosy has three rate tiers, with cheaper periods designed around heat-pump use. The question is not whether Cosy is always below the cap; it is whether your heat pump, hot water schedule and home comfort needs can avoid enough of the evening peak.

Flux was designed for solar and battery homes. For existing customers, the import rates and export payments can still be useful when generation, battery storage and household use line up. For new customers, treat Flux as a legacy reference point unless Octopus reopens it.

Historical context

The price cap was introduced for default tariffs in 2019, after a separate prepayment cap had already existed. For the first few years it was relatively stable, moving up and down gently in response to moderate wholesale price changes.

Then came the 2022 energy crisis. Global gas prices rose sharply after Russia’s invasion of Ukraine and after post-pandemic demand returned. Ofgem’s calculated cap rose far beyond normal household expectations, then the government’s Energy Price Guarantee limited what households actually paid for a period.

Since that peak, prices have come down but they have not returned to pre-crisis levels. Through 2024, the cap fell from £1,928 in Q1 to £1,568 by Q3, before rising to £1,717 in Q4. In 2025, it moved between £1,738 in Q1, £1,849 in Q2, £1,720 in Q3 and £1,755 in Q4. The April to June 2026 cap of £1,641 is £117 lower than the January to March level. Ofgem’s breakdown shows the main fall came from lower policy costs, while network costs rose and wholesale costs fell by a smaller amount.

Why the cap matters for tariff choice

The cap gives you a useful benchmark. For a breakdown of how each Octopus tariff works, see our understanding tariffs guide. If a smart tariff saves you 15% compared with Flexible, the cap helps you translate that into a rough pounds-and-pence comparison.

Think of the cap as the “do nothing” baseline. It is close to what you would pay on a standard variable tariff if you made no active tariff choice. A smart tariff is not automatically better; it is a fit question about your home, meter, car, heating, battery and willingness to shift usage.

Quarterly changes and what to watch

The cap changes every three months, which means standard variable prices are not fixed. Cap levels also vary by electricity region, payment method and meter type. Each quarter, check the new cap figures and compare them with your current tariff. If you are on a fixed deal, look at the actual unit rates, standing charges, exit fees and remaining term rather than only the headline annual cap.

The current cap runs from 1 April to 30 June 2026. Ofgem confirmed it at £1,641 for a typical dual-fuel household paying by direct debit, with GB average direct-debit rates of 24.67p/kWh for electricity, 57.21p/day electricity standing charge, 5.74p/kWh for gas and 29.09p/day gas standing charge. Those figures are the May 2026 snapshot from Ofgem’s published cap guidance and can vary by region.

Ofgem also says a one-year lower-standing-charge pilot is starting with Octopus, British Gas, EDF and E.ON. That pilot matters if you are a low-usage household, but it is not the new default. A lower standing charge is usually balanced by a higher unit rate, so it can help some homes and cost others more.

The next cap period is 1 July to 30 September 2026. Ofgem says it will publish that level by 27 May 2026. Until then, forecasts are useful background rather than final tariff advice.