What is the Ofgem price cap, and how does it affect your bill?
Short answer first: the Ofgem price cap limits what a supplier can charge per unit of energy and per day in standing charge. It does not limit your total bill, so if you use more, you still pay more. It only covers default tariffs, not fixed deals, and Ofgem updates it every three months.
That one sentence clears up the most common mix-up. "The cap is £1,723" is not a promise that your bill will be £1,723. It is a yardstick, and your own bill depends on how much you use.
Everything below comes from Ofgem's price cap pages, which I read on 29 October 2026. Figures change every quarter, so check the date on anything you use.
What the cap actually limits
Ofgem describes the cap as "the maximum amount your supplier can charge for a unit of energy and standing charge together". There are two parts:
- The unit rate: the price of each kilowatt hour (kWh) of electricity or gas.
- The standing charge: a daily fee you pay even on a day you use nothing.
Ofgem is clear that it "does not limit the cost of your total bill". Use twice as much and you pay roughly twice as much for the units, whatever the cap says.
The level varies by region, payment method, fuel type and meter type. Ofgem also uses a levelisation allowance so that prepayment and Direct Debit customers pay the same standing charge.
Who it protects, and who it doesn't
The cap applies to default tariffs, also called standard variable tariffs, where the unit rate can move with the energy market. Ofgem says it protects around 22 million households on default tariffs.
It does not cover:
- fixed tariffs, which have their own price for the length of the deal
- business energy contracts
- homes that get heat from a heat network or heating oil
In Ofgem's announcement for October to December 2026, around 35% of households were on fixed tariffs and so not affected by that rise. If you have not chosen a tariff, or your fixed deal has ended, you are almost certainly on the cap.
The numbers from 1 October to 31 December 2026
Ofgem's headline is that the cap rose 4% to £1,723 a year for the average household using both electricity and gas, up from £1,663. It says that is "if this level was sustained for a year", which is why it is a yardstick and not a bill. Ofgem puts the rise down to higher wholesale gas prices from the conflict in the Middle East.
The detail underneath is what matters. These are Ofgem's Direct Debit figures averaged across Great Britain:
| Unit rate | Standing charge | |
|---|---|---|
| Electricity | 26.32p per kWh | 54.83p a day |
| Gas | 7.97p per kWh | 29.68p a day |
Two notes. Electricity is shown without VAT from 1 October 2026 to 31 March 2027, because the government removed VAT from household electricity for that period. Gas includes 5% VAT. I covered the VAT change and what the Budget did to it in my Autumn Budget post.
What that means for your own bill
Here is a worked example, using the rates above. The usage figures are my illustrations, not Ofgem's typical values, so swap in your own from your bills or smart meter.
| Lower use household | Higher use household | |
|---|---|---|
| Electricity used | 1,500 kWh a year | 2,500 kWh a year |
| Gas used | 5,000 kWh a year | 10,000 kWh a year |
| Electricity units | £394.80 | £658.00 |
| Electricity standing charge (365 days) | £200.13 | £200.13 |
| Gas units | £398.50 | £797.00 |
| Gas standing charge (365 days) | £108.33 | £108.33 |
| Total | £1,101.76 | £1,763.46 |
Same cap, same rates, bills £660 apart. And notice that the standing charges are identical in both columns. That is why the cap tells you nothing about your own total, and why a low user feels standing charges more.
Those totals assume the October to December rates held for a full year. They will not, because the cap changes every three months.
What happens in January
Ofgem sets the cap every three months, and the next announcement is on 25 November 2026, for 1 January to 31 March 2027.
I don't have a confirmed number. The consultancy Cornwall Insight forecast on 30 September that the January cap could rise 16% to £1,999 a year, blaming disrupted gas supplies and low gas storage in Europe. That is a forecast, not Ofgem's figure, and forecasts move. Treat it as a reason to check your options, not as a certainty.
Is the cap the cheapest option?
Not necessarily. The cap is a ceiling for default tariffs, not a recommendation. Ofgem's own announcement says fixed tariffs were available at £100 or more below the October price cap.
That can change, and fixed deals can carry exit fees, so read the terms. If you want to compare properly:
- Find your real usage. Use a recent annual figure from your bill or supplier account, not the national average.
- Check the standing charge as well as the unit rate. A low unit rate with a high standing charge suits heavy users. The reverse suits light users.
- Look at exit fees before you commit to a fixed deal, and the date it ends.
- If you have a smart meter, use your half-hourly data. Our Should I switch? tool takes your usage file and works out what you would have paid on each tariff, including the time-of-use ones.
If you are not sure what a time-of-use tariff would mean for you, my earlier post on who Octopus Agile suits is a sensible next read.
The short version
- The cap limits the unit rate and standing charge, not your total bill.
- It protects people on default tariffs, not fixed deals.
- It changes every three months. The next announcement is 25 November 2026.
- Your bill depends on your usage, so check your own numbers rather than the headline.
Next step: have your latest annual usage to hand before 25 November, so you can compare the new cap with a fixed deal in minutes rather than weeks.