What is the energy price cap?

The energy price cap is a restriction on the maximum amount that customers can be charged for gas and electricity by energy suppliers. It is intended to protect consumers from price volatility and ensure that they are paying a fair price for their energy.

What are the types of price caps?

The default tariff cap applies to standard variable tariffs, which are usually the default option for customers who do not choose a specific energy plan. It limits the maximum price per unit of energy (per kWh) and the maximum daily standing charge.

The prepayment meter cap applies to customers who pay for their energy using a prepayment meter. It sets limits on the maximum amount that can be charged per unit of energy and the standing charge for these customers.

How is the cap set?

The regulator Ofgem reviews and updates the cap periodically, typically every six months. The cap is calculated based on a range of factors including the cost of wholesale energy, network costs, and the cost of environmental and social obligations.

According to MoneySavingExpert, from October the price most households pay for energy will rise by an average of 10% as the latest Energy Price Cap rates have been announced by energy regulator Ofgem.

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The cap encourages switching to other suppliers

The cap encourages consumers to switch suppliers by making it easier to compare tariffs and ensure that they are getting a good deal. While the cap protects against excessive prices, it also means that consumers should still shop around for the best available deals.