Energy price cap (default tariff) policy
Our policy about how we protect people who are on standard variable energy tariffs (default tariffs) to make sure energy prices are fair.
Overview
We are responsible for setting the energy price cap for England, Scotland and Wales. It protects households that are on standard variable tariffs, known as ‘default’ tariffs.
The energy price cap is set out in legislation called the Domestic Gas and Electricity (Tariff Cap) Act 2018 (the ‘Act’). It makes sure that the price people pay for the energy they use is fair and covers the costs to supply that energy, such as improvements to customer service. The cap also means that when all costs included in the cap go up, the level of the cap goes up. This is so that energy suppliers can recover these costs to reduce the risk of them going bust. When costs go down, the level of the cap also goes down.
The price cap started on 1 January 2019. Read how we designed and set up the energy price cap (Default Tariffs).
UK government’s Energy Price Guarantee
Between 1 October 2022 to 30 June 2023 the UK government’s support rate discount, called the Energy Price Guarantee gave a discount to all households on their gas and electricity bills. This meant that energy bills for a typical household per year were around £2,500.
From 1 July 2023 the level of the energy price cap was set lower than the government’s Energy Price Guarantee (£3,000 per year). This meant that the maximum amount a typical household could pay for their energy between July to September 2023 was £2,074 per year.
The government’s discount is still running and will remain in place as a safety net until the end of March 2024 should energy prices increase above £3,000 per year. Read the UK government’s Energy Price Guarantee policy on GOV.UK.
Setting the energy price cap
We update the cap every three months, in January, April, July and October. We announce the new cap levels about a month before the start of the cap period.
When we set the cap, we review the costs included and its design. We may also change the way we calculate them. If we change the design of the cap, we will seek views from interested groups to gather their feedback to support our policy decisions.