Energy price cap explained: rates from 1 October 2026 and your bill

The energy price cap limits unit rates and standing charges, not your total bill

The energy price cap is the most a supplier can charge people on a standard variable (default) tariff for each kilowatt hour (kWh) of gas and electricity and for the daily standing charge. It is set by Ofgem, the energy regulator for England, Scotland and Wales, under the Domestic Gas and Electricity (Tariff Cap) Act 2018.

According to Ofgem, the cap "does not limit the cost of your total bill. The more energy you use, the higher your bill will be." The headline figure of £1,723 a year is only what a typical home would pay at capped rates; a home that uses twice as much energy pays far more, and a small flat pays less.

Your bill is built from two parts, and the cap limits both:

• the unit rate, in pence per kWh, multiplied by the energy you use;
• the standing charge, in pence per day, paid even on days you use nothing.

To see what the capped rates mean for your own usage, put the kWh figures from your bill into the energy tariff and bill checker. It also splits a bill rise into usage, unit rate, standing charge and VAT.

The energy price cap from 1 October 2026 is £1,723 a year for a typical home

The energy price cap from 1 October to 31 December 2026 is £1,723 a year for a typical household paying by Direct Debit for gas and electricity, up 4% from £1,663 in July to September 2026. Ofgem announced the new level on 26 August 2026.

The cap level depends on how you pay. According to Ofgem's summary letter of 26 August 2026, the typical yearly figures for October to December 2026 are:

Prepayment has the lowest cap. Ofgem's press release says prepayment customers could save about £45 on average compared with Direct Debit. For Economy 7, Ofgem says the peak and off-peak rates together cannot be more than the cap; whether that tariff suits you is covered in is Economy 7 worth it.

Price cap rates include VAT on gas, and electricity has no VAT until 31 March 2027

The published price cap rates include VAT, and the standing charge is part of the cap. From 1 October 2026 to 31 March 2027 the government has removed VAT from all domestic electricity bills, so the 26.32p unit rate and 54.83p standing charge carry no VAT. Gas stays at 5% VAT, which is already inside the 7.97p and 29.68p figures.

According to Ofgem, without the VAT cut the October cap would have been around £45 higher, and gas bills rise by 8% while households that use no gas see a rise of less than 1%. Ofgem also says the VAT removal applies to people on fixed tariffs, with the discount applied automatically by suppliers.

Because the tax changed, Ofgem warns that costs "cannot be compared directly to previous periods". The worked example below separates the tax change from the price change so you can see both.

Worked example: a 2,700 kWh and 11,500 kWh home pays £72.99 a year more from October

A household using 2,700 kWh of electricity and 11,500 kWh of gas a year pays £1,935.65 a year at the October to December 2026 capped rates, against £1,862.66 at the July to September rates: £72.99 more, or 3.9%. These are the figures from the site's energy tariff engine, using Ofgem's average Direct Debit rates and 365 days of standing charges.

These usage figures are Ofgem's 2023 medium values, which many older bills and guides still quote. Ofgem's own press release gives the same result: £1,862 rising to £1,935 at the 2023 figures.

Almost all of the rise is gas: £75.88 a year more. The electricity side falls by £2.95, from £913.72 to £910.77, because two changes nearly cancel out. Before tax, the higher unit rate and standing charge add £42.59 a year; removing 5% VAT takes off £45.54. The engine's bill-change mode shows this split when you enter both bills before VAT with their tax rates.

A monthly figure is an average. Your real October to December bills will be higher than one quarter of the yearly total, because most gas is burnt in winter. Reproduce the example, or run your own kWh, in the energy tariff and bill checker.

Typical domestic consumption values set the £1,723 figure

The £1,723 cap figure assumes 2,500 kWh of electricity and 9,500 kWh of gas a year, Ofgem's medium typical domestic consumption values (TDCVs) from 1 July 2026. Ofgem lowered them in its decision of 27 May 2026, saying households now use around 7% less electricity and 17% less gas than at the last review.

The yearly costs in the last column come from the site's engine at the average Direct Debit rates. For Economy 7 and other multi-rate meters, the 2026 medium value is 3,400 kWh, down from 3,900 kWh.

Ofgem calls the TDCV a presentational tool: it changes the headline, not your rates. It does have one side effect, which Ofgem explains: suppliers recover certain costs over fewer units, so the cap unit rate rises a little. Your own annual kWh, shown on your bill or online account, is the number that decides what you pay.

Ofgem sets the cap every 3 months; the next announcement is due by 25 November 2026

Ofgem reviews the energy price cap every 3 months, and the next level, for 1 January to 31 March 2027, will be announced by 25 November 2026. According to Ofgem, it may publish earlier "if we need to because of external reasons".

The cap is calculated from the costs of supplying energy, not chosen freely. Ofgem's letter of 26 August 2026 gives the share of each cost in the October to December Direct Debit cap:

• wholesale energy, including contracts for difference: 47%, up from 44%;
• networks (pipes and wires): 24%;
• operating, debt and industry costs: 17%;
• government policy schemes such as the Warm Home Discount: 6%;
• supplier earnings before interest and tax: 2.7%;
• headroom 1% and levelisation allowance 0.5%, plus 5% VAT on gas.

Ofgem says the wholesale allowance rose 11% this quarter, with gas up 13% and electricity up 10%, driven by conflict in the Middle East and high temperatures across Europe. Whether the January cap goes up or down depends mainly on wholesale prices. Forecasts from consultancies are estimates, not Ofgem figures, and this guide does not repeat them.

The price cap varies by region: from £1,672 in the East Midlands to £1,804 in Merseyside and North Wales

Energy price cap rates differ by region because network costs and local demand differ. Ofgem says standing charges depend on how many people live in your region, how much energy is used there, the energy the supplier needs to buy and the cost of the local network.

The table below uses Ofgem's cap tables for 1 October to 31 December 2026, which give a yearly cost at nil use and at typical use for each region, before VAT. We worked out the daily standing charge (nil-use cost divided by 365) and the unit rate (the difference divided by 2,500 kWh), and added 5% VAT to gas. The 14 regions average exactly 26.32p and 54.83p for electricity, matching Ofgem's headline rates.

The typical bill column uses 2,500 kWh of electricity and 9,500 kWh of gas. Electricity standing charges show the widest spread: 42.92p a day in London against 67.66p in Merseyside and Northern Wales, a gap of £90.31 a year before you switch anything on. Ofgem's rates page has a postcode search if you do not know your region.

The cap does not apply in Northern Ireland: the 2018 Act extends to England, Wales and Scotland, and Ofgem's figures cover those three nations only.

Who the price cap covers, and who it does not

The energy price cap protects households on standard variable (default) tariffs, whether they pay by Direct Debit, standard credit, prepayment meter or on Economy 7. According to Ofgem's press release of 26 August 2026, the cap protects around 22 million households.

According to Ofgem, you are not protected by the price cap if you:

• agreed a fixed tariff with your supplier;
• have a business energy contract;
• get your heat from a heat network;
• use heating oil.

Businesses are outside the cap, although Ofgem says the electricity VAT removal also applies to some small businesses. If you rent a home supplied on a business contract, Ofgem has separate guidance for that case. To check which you are on, look at your bill: a fixed tariff shows an end date, and a standard variable or default tariff does not.

Fixed deals compared with the price cap: about £100 cheaper, but check the exit fee

A fixed energy tariff locks your unit rates and standing charges for a set term, so the quarterly cap changes do not affect it in either direction. Ofgem's press release of 26 August 2026 says fixed tariffs are available at £100 or more below the October cap, and around 11 million households are already on one.

Example. Take an illustrative fixed deal at 24.50p per kWh for electricity and 7.40p for gas, with the same standing charges as the cap. At Ofgem's medium use of 2,500 kWh and 9,500 kWh, the engine gives £1,623.96 a year against £1,723.61 on the cap: a saving of £99.65. For the 2,700 kWh and 11,500 kWh household above it saves £114.69, and at low use it saves £63.32. Heavier users gain most from a lower unit rate; light users gain more from a lower standing charge, as standing charge vs unit rate explains.

Three checks before you fix:

1. Exit fees. According to Ofgem, suppliers cannot charge exit fees for switches in the 49 days before a fixed term ends, and must contact you 42 to 49 days before it ends.
2. The standing charge. A low unit rate with a high standing charge can cost a low user more than the cap.
3. The direction of the cap. A fix that is cheaper than today's cap may be dearer than a future cap if wholesale prices fall. The saving is only certain for the current quarter.

What to do next with your energy bill

Your next step is to find your annual kWh and your region, then price them. The steps take about 10 minutes with a recent bill.

1. Find your yearly electricity and gas use in kWh on your latest bill or annual statement, and your tariff name.
2. Look up your region's capped rates in the table above, or your actual rates on your bill.
3. Enter your kWh, your current rates and any fixed quote into the energy tariff and bill checker to see the yearly cost and any exit fee payback.
4. Find where the kWh go: the appliance electricity cost calculator prices a single appliance at 26.32p per kWh, and the running costs pages cover common appliances.
5. Put a reminder in your diary for 25 November 2026, when Ofgem announces the January cap, and check your rates again then.