Every three months a new energy price cap figure makes the headlines, usually framed as the amount a typical household will pay for the year. That framing causes a lot of confusion, because the cap is not a limit on your total bill at all. It is a ceiling on the per-unit price your supplier can charge for gas and electricity, plus a ceiling on the daily standing charge. Use more energy and you pay more; use less and you pay less. Understanding what the cap controls, and what it leaves to you, is the difference between worrying about a number on the news and actually managing what lands on your doormat.
The short answer. The energy price cap, set by the regulator Ofgem, limits the maximum unit rate and standing charge your supplier can charge on a standard variable tariff. It does not cap your total bill. The widely quoted figure (£1,862 a year for July to September 2026) is just an example based on a typical household using a set amount of energy. Your actual bill depends entirely on how much gas and electricity you use.
What the cap actually limits
The price cap sets a maximum on two things for customers on a standard variable tariff who pay by direct debit: the rate per kilowatt hour (kWh) of gas and electricity, and the daily standing charge you pay just for being connected. It does not put a limit on the total amount you can be billed.
For 1 July to 30 September 2026 the cap works out at these average levels across England, Scotland and Wales:
- Electricity: 26.11p per kWh, plus a standing charge of 57.19p a day
- Gas: 7.33p per kWh, plus a standing charge of 29.04p a day
The standing charge is fixed daily and you pay it whether or not you use any energy. Everything else scales with usage. If you understand those four numbers you can read your own bill and ignore the headline figure entirely. Our guide to understanding your energy bill breaks down where each of these appears on the page, and standing charges explained covers why that daily fee exists and why it has climbed in recent years.
Why the headline figure is not your bill
When the news reports a cap of "£1,862 a year", that is the cost for one specific imaginary household. Ofgem assumes a typical home uses 2,700 kWh of electricity and 11,500 kWh of gas over a year, applies the capped rates and standing charges, and prints the total. It is a yardstick for comparing one cap period against the next, nothing more.
Your own home almost certainly uses a different amount. A single person in a small flat might use a third of that. A large family with electric heating could use double. The cap figure tells you the price of energy has gone up or down by a certain percentage; it does not tell you what you personally will pay.
The honest way to estimate your cost is to take your own annual usage in kWh (from past bills or your smart meter) and multiply by the capped unit rates, then add the standing charges for 365 days. That gives you a figure that means something, rather than a national average that may bear no relation to your home.
How Ofgem sets the cap
Ofgem reviews the cap every three months and announces the new level several weeks before it takes effect. The single biggest ingredient is the wholesale cost of gas and electricity, which suppliers buy in advance on the markets. The recent rise for July 2026 was driven by higher wholesale gas prices.
Wholesale costs are only part of it. The cap also includes the cost of running the energy networks, the cost of government social and environmental schemes, suppliers' operating costs and a small allowed profit margin, plus VAT at 5%. Each of these sits in a separate bucket in Ofgem's calculation, which is why the standing charge and the unit rate can move in different directions from one quarter to the next.
Because wholesale prices feed in with a lag, the cap tends to follow the market a few months behind. That is worth remembering when prices are clearly falling or rising in the news but your cap has not yet caught up.
Working out your own annual cost
Here is the method applied to a few example usage levels, so you can see how the same capped rates produce very different bills. Find the row closest to your own usage, or better still plug in your actual kWh figures from your bills.
| Household | Electricity (kWh/yr) | Gas (kWh/yr) | Energy cost | Standing charges | Total/yr |
|---|---|---|---|---|---|
| Low use (flat, 1 person) | 1,800 | 7,500 | £550 | £314 | £864 |
| Typical (Ofgem example) | 2,700 | 11,500 | £1,548 | £314 | £1,862 |
| Higher use (family home) | 4,200 | 17,000 | £2,343 | £314 | £2,657 |
At 26.11p/kWh electricity and 7.33p/kWh gas, plus standing charges of 57.19p and 29.04p a day, Ofgem cap July to September 2026. Figures rounded.
The standing charge column is the same in every row, because you pay it regardless of usage. That is also why low users sometimes feel the standing charge is a large slice of their bill: at £314 a year for both fuels combined, it can be a third or more of a light user's total. Everything above that line is yours to influence by using less.
What the cap does not cover
Several common situations sit outside the standard cap, so it pays to know whether it even applies to you.
- Fixed tariffs: if you have signed up to a fixed-price deal, your rates are locked in by your contract, not the cap. A fix can be cheaper or dearer than the cap depending on when you took it out. See fixed vs variable tariffs for the trade-off.
- Time-of-use and EV tariffs: tariffs with cheap overnight rates sit outside the standard cap structure. They can save money if you can shift heavy use to off-peak hours, for example charging a car or running storage heaters at night.
- Prepayment and standard credit: the cap is set at slightly different levels for these payment methods, with direct debit usually the cheapest.
- Northern Ireland: the Ofgem cap covers England, Scotland and Wales only. Northern Ireland has a separate market and regulator.
The cap also does nothing to limit how much energy your home demands in the first place. Insulation, heating controls and the efficiency of your appliances all sit on the usage side of the equation, which is the side you control. Cutting draughts and topping up loft insulation reduce the kWh you burn, and that reduction is real money whatever the cap happens to be that quarter.
The bottom line
The price cap is a safety net on the price of each unit, not a limit on your bill. Treat the headline figure as a barometer of whether energy has got cheaper or dearer, not as your personal cost. The numbers that matter to you are your own annual kWh and the four capped rates: two unit rates and two standing charges.
Once you have those, you can estimate your real annual cost, decide whether a fixed deal or a time-of-use tariff would beat the cap for your usage pattern, and focus your effort where it actually moves the needle, which is using less in the first place. Energy schemes and cap levels change every few months, so always check the current figures on the official Ofgem page before making a decision. If you are weighing up a switch, our guide to switching suppliers walks through the comparison.