Energy price cap will fall by 7% from April

Energy regulator Ofgem has today (Wednesday 25 February) announced a 7% (or £117) reduction of the energy price cap for the period covering 1 April to 30 June 2026. 

This change amounts to a reduction of around £10 a month for the average household using both electricity and gas.  

The price cap refers to the default tariff applied when a customer is not on a fixed-rate tariff. It sets a maximum rate per unit and standing charge that can be billed to customers for their energy use. 

For an average household paying by Direct Debit for gas and electricity, the overall bill will be £1,641 per year. Recent government budget interventions relating to policy costs are the main cause of this reduction.  

Today’s level marks a significant reduction in the cap level and is more than £200 lower than a year ago. This reflects the government’s decision to take £150 in policy costs off energy bills. 

The regulator says the recent reduction in energy prices is welcome but that consumers remain exposed to the volatility that increased bills during the crisis, as wholesale gas costs still make up the largest part of the bill. Investing in our networks as part of transitioning to a greener, homegrown energy system will help reduce our reliance on volatile international markets in the longer term.  

Ofgem is also encouraging customers to shop around and consider whether fixing with their existing supplier or switching could save them money. Last year, customers on a fixed tariff paid around £115 less on average compared to those on the price cap.  

Tim Jarvis, Director General, Markets, at Ofgem, said:  

“Today’s announcement will be welcome news for many households. Wholesale energy prices have fallen in recent months, and we’re investing in our network to safeguard the future energy system. The main driver of today’s reduction is the change to policy costs announced by the Chancellor in the budget. 

“Our focus at Ofgem remains on bearing down on the costs within our control, and unlocking the investment needed to support the transition to a more stable energy system over the longer term. 

“We’re also seeing encouraging signs of greater engagement and competition, with switching increasing by almost 20% year on year. More households are choosing time‑of‑use tariffs that offer cheaper off‑peak rates, and suppliers are offering a wider range of products, including deals with savings at evenings or weekends.  

“The price cap protects households from overpaying for energy, but it’s a safety net. Last year, consumers on fixed deals paid around £115 less than the cap on average, so we’d encourage people to speak to their supplier about the options available and consider whether a different tariff or payment method could help bring their bills down further.” 

Customers could also save money by changing payment methods from standard credit to Direct Debit or smart prepayment. Currently 8 million customer accounts pay by standard credit but could be making savings of around £131 with one simple switch. 

Ofgem has also confirmed that a pilot for lower standing charge tariffs will be starting from this spring to bring greater choice for consumers, particularly those with low energy usage. It will first be offered to eligible customers of EDF, E. ON, Octopus and British Gas. 

The regulator urges anyone struggling with their bills gets the help they need from their supplier and encourages customers to reach out for support if needed. 

That could include tailored repayment plans, which can help households regain control and avoid falling further behind, or routes to financial assistance and debt advice. 

Notes to editors 

1. The price cap decrease is driven by government’s recent budget interventions on policy costs. These savings will apply to all customers. But the reduction will differ for each household depending on usage. 

   Customers with higher energy usage will see an even greater reduction on their bills – particularly high electricity users. This is due to a 75% reduction in Renewables Obligation costs which only affects electricity bills. View more information. 
    

2. Wholesale prices – which continue to make up the largest portion of the bill - are currently stable and have fallen by 6% over the past three months. However, unpredictable global events leave us open to volatility and prices could change. Building a clean energy system now means we can move away from markets beyond our control to boost energy security and stability. 
    
3. We are also today confirming a decision to move Warm Home Discount costs from standing charges to the unit rate, following a government decision. As a result, standing charges will drop by an average of £13, or 4p a day, for customers using both electricity and gas. 
    
4. When adjusted for inflation the new cap is 12.3% or £231 lower than the same period in 2025. 
    
5. For any queries relating to government’s Warm Home Discount or the budget intervention, please contact the Department for Energy Security and Net Zero. 
    
6. Network costs have increased by £66 (£6 a month). This is primarily due to the price control changes associated with RIIO3, and the investment needed to upgrade our energy infrastructure. This investment will upgrade power and gas grids - creating a future-ready system that will help stabilise energy bills further in the long term. 
    
   You can read more about this, and all factors making up the new price cap level, in our summary of changes.
    
7. Overall number of domestic customer accounts on Standard Variable Tariffs (SVT) – ‘around 33 million’ of which:

• new no. of SVT Direct Debit accounts – ‘around 19 million’
• new no. of SVT Standard Credit accounts – ‘around 8 million’ 

• new no. of SVT PPM accounts – ‘around 6 million’ 

  Total number of domestic customer accounts on fixed tariffs ‘around 21 million’.