The Ofgem price cap explained, and what it does to a typical bill

Every few months a headline number does the rounds: the price cap has gone up, or down, by some percentage. It rarely tells you much on its own, because a cap on the rate you're charged is not the same thing as a cap on what you pay.

The current cap runs from July to September 2026, and it sets the maximum a supplier on a standard variable tariff can charge per unit of gas or electricity, plus a maximum standing charge for simply being connected. What actually lands on your statement depends on how much you use on top of that.

The rates behind the headline

For this quarter, the cap works out at 26.11p per kWh for electricity, with a standing charge of 57.19p a day, and 7.33p per kWh for gas, with a standing charge of 29.04p a day. Both are before VAT, which is charged at 5% on domestic energy in Great Britain.

Standing charges are the part people tend to overlook. They apply whether you use a single unit of energy or none at all, and between the two fuels they add up to roughly £315 a year before you have switched a single appliance on. That is worth knowing if you are away for long stretches, or if you are weighing up going all-electric and dropping the gas supply entirely.

What a typical household actually pays

Ofgem defines a "medium" household as using around 2,500 kWh of electricity and 9,500 kWh of gas a year, roughly a three-bedroom semi with gas central heating and a reasonably average family living in it. Run those figures through the current rates and it looks like this:

That comes to just over £145 a month, though of course nobody's bill actually arrives in twelve identical instalments. Winter months eat far more gas than summer ones, which is exactly why most suppliers average the cost out over the year on direct debit rather than billing you for what you used that month. It smooths the cash flow, but it also means a bill in August tells you very little about what you will pay in January.

Use a smaller flat instead of a semi, or swap gas heating for electric storage heaters, and the shape of that bill changes completely, not just the total. That is really the point of running your own numbers rather than trusting a single national average.

What actually changes on 1 October

It is easy to assume the next quarterly change means new unit rates, since that is usually how it works. This time the bigger story for most households is a change to VAT rather than the cap itself. From 1 October 2026, VAT on domestic electricity is being cut from 5% to 0% for six months, running until 31 March 2027, in England, Scotland and Wales.

For the household in the example above, that removes the VAT sitting on the electricity portion of the bill, roughly £43 over a full year, or something closer to £21 over the winter half where the cut actually applies. Ofgem's own estimate for a typical household puts the saving at around £45 across the six months once gas usage is factored in too. It is not applied for, it should simply show up as a lower total once your supplier updates its systems.

Worth flagging: this is a VAT change, not a signal that wholesale energy has got any cheaper. The unit rates themselves are still reviewed separately every quarter, and there is no guarantee they will fall alongside it. Treat the two as unrelated pieces of good and possibly-less-good news.

A cap on price is not a cap on your bill

The one thing worth repeating, because it catches people out every winter, is that "price cap" refers to the rate, never the total. If you live in a large, draughty Victorian house and use three times the typical amount of gas, the cap does nothing to stop your bill running to three times the typical figure. It protects you from being charged more than the maximum rate on a standard tariff. It does not protect you from your own consumption.

If you are on a fixed-term deal rather than a standard variable tariff, the cap does not apply to you directly either, though it still shapes the market your supplier is competing in. Always check which type of tariff you are actually on before assuming the quarterly cap announcement changes anything for you personally.

This guide is general information, not financial advice. Energy prices and government policy change, so check current Ofgem figures and your own bill before making decisions.