Energy price caps: Ofgem and government’s role

Mae’r dudalen yma ar gael yn Gymraeg.

Who is Ofgem?

We are the energy regulator in Great Britain. Our priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating the energy networks. We are independent of government, although we work closely with them and industry.

It’s Ofgem’s task – as the energy regulator we’ve been given special duties by the UK government – to set the level of the caps for suppliers. We revise them twice a year so consumers protected by the caps pay no more than the underlying costs to get energy to their homes. This keeps prices fair and protects against overcharging.

Why are we doing this?

We want to make sure consumers are protected and get a fair deal at all times.

Our research has found the energy market is not working for all consumers and those who have not switched tariff or energy supplier are losing out. More than half of UK consumers have never switched or have only switched once, and are on more expensive default and standard variableopen key term pop-up tariffs as a result. These customers overpay by around £320 a year compared to the cheapest market deal.

Price differences between default and standard variable tariffs and fixed tariffs have widened, suggesting suppliers can offer low-price fixed tariffs to attract active consumers and cover direct costs, but rely on the higher prices charged to less active customers to cover their operating costs and maintain profits.

Additionally, the Competition and Markets Authority found that if you’re a prepay customer you have fewer tariff choices and pay disproportionately more than customers who pay in other ways, like direct debit or credit.

Price caps are temporary measures. They ensure that if you are less active in the market you don’t get left behind and pay a fairer price for your energy. This is while more wide-reaching reforms like faster switching and smart meters, alongside other advances in the energy industry, bring about easier access to better deals.

Helping people understand price protection

Through our website and resources, we aim to help consumers understand how they are being protected and what to expect from their supplier if they are eligible.

We are working with consumer organisations to spread the word. You can access our free resources to support this below. We want energy consumers to understand that while energy price caps bring peace of mind, it pays to shop around and you could still save more money with a different tariff or supplier.

Find out more

About energy price caps

View energy price cap resources

What is the government’s role?

Based on our reports, it will be up to the government to consider if the market is working well enough for energy price caps to be removed.

What else?

Ofgem is also here to keep a close eye on energy suppliers and to monitor the market to make sure it is competitive. We’ll report to government on this, while also delivering significant longer-term reforms to make the market work better.

These include a range of changes to help improve competition and potentially drive down prices for more consumers – from making switching happen within one working day, supporting the rollout of smart meters, to trials to help people on the worst deals save money, such as through simplified collective switching.

Default tariff

If you’ve never switched energy supplier or have switched only once, you’re likely to be on a poor value, more expensive ‘default’ tariff. Default tariffs, including standard variable tariffs, are a basic tariff from an energy supplier. More.