What the new Ofgem price cap means for your bill

Every three months, Ofgem announces a new “price cap” and there’s a flurry of headlines saying bills are going up £X or down £Y. Most of the coverage uses a single reference figure — Ofgem’s “typical household” at 2,700 kWh electricity and 11,500 kWh gas — and if you use more than that, or less, or just electricity, the headline is wrong for you.

This post explains what the cap actually is, who it covers, and how to work out the delta for your home rather than theirs.

What the cap caps

The price cap is a ceiling on two things:

1. The unit rate (p/kWh) for electricity and gas
2. The daily standing charge (p/day) — what you pay whether you use any energy or not

It does not cap your total bill. Use more, pay more. It also only applies to customers on a supplier’s default (non-fixed) tariff. If you signed up to a 12-month fixed deal, the cap doesn’t apply to you until your fix ends.

Around 29 million UK households are on default tariffs right now, which is why the cap is such a big deal.

Who the cap doesn’t cover

• Fixed-tariff customers. You’re on whatever rate you signed.
• Northern Ireland. NI has a separate regulated market; the cap is Great Britain only.
• Business customers. The non-domestic market has its own (much more broken) regulation.
• Prepayment-meter customers get the cap but at slightly different rates — usually cheaper on unit, dearer on standing charge. This has flipped periodically; check your supplier.

The three payment-method variants

Rates vary by how you pay:

• Direct debit — cheapest. Supplier gets guaranteed payment, you get the lowest unit rate and standing charge.
• Prepayment meter — usually close to direct debit, sometimes slightly cheaper on unit rate.
• Standard credit (you pay each bill on receipt) — most expensive. Higher unit rates and standing charges to compensate the supplier for cash-flow and bad-debt risk.

The spread between direct debit and standard credit on a typical household is around £150/year — one of the cheapest “switch to” wins available, and zero behaviour change required.

When does it change?

Four times a year: 1 January, 1 April, 1 July, 1 October. Ofgem announces the new cap about six weeks before it takes effect, which is why your Twitter feed fills up with “bills rising by £X” posts every quarter regardless of what the actual number is.

Why the headline £ figure is wrong for you

Ofgem’s “typical household” is 2,700 kWh electricity and 11,500 kWh gas a year. If you have:

• Electric-only — your bill is a fraction of the headline, but a bigger proportion of it is electricity, so you feel the electricity cap change more.
• Heat pump on gas-lite — your electricity is much higher and gas much lower, so the net change depends on which unit rate moved more.
• Large / inefficient home — you use maybe 4,500 + 18,000 kWh; the £ delta is proportionally larger than the headline.
• Small flat — the £ delta may be negligible; the % change matters more.

This is why a calculator beats a news headline: you put in your own kWh and see your delta.

What to actually do about the cap

If you’re on default tariff right now:

• Compare the cap numbers against live fixed tariffs. If a fix at <10% above the cap looks defensible and you want certainty, take it.
• Move to direct debit if you’re on standard credit. Biggest cheap win.
• Consider Octopus Agile if you can shift load to overnight hours — especially if you have an EV or a heat pump.

If you have solar:

• The cap change affects your import side. Your export side is separate — see the SEG tariff comparator.
• Rising cap = bigger self-consumption value = shorter solar payback.

If you’re thinking about a heat pump:

• A rising electricity cap narrows the heat-pump-vs-gas gap. A rising gas cap widens it. Use our heat-pump calculator to see the current break-even.

Get your number

Drop your annual kWh into the cap impact calculator and it’ll show you:

• What the current cap costs you per year
• What the prior cap cost you per year
• The £/month and £/year delta
• Breakdown by electricity / gas / standing charge

Four times a year — once each time Ofgem resets — open it and see where you actually are. It takes thirty seconds and beats the news headline by about an order of magnitude in accuracy.