What’s the UK Energy Price Cap and Why Is It Rising?

The cost of energy is jumping for UK households, with regulator Ofgem raising the limit on how much it allows suppliers to charge. That’s as wholesale natural gas prices have surged following Russia’s invasion of Ukraine. In early August, Ofgem warned a challenging winter lay ahead, a reflection of record gas and power prices. The government is facing strong calls from lawmakers, campaigners and the industry to review the system of how homes are charged.

The system, introduced in January 2019 by Ofgem during Theresa May’s administration, was designed to save money for consumers as it sets out how much suppliers could charge homes per unit for the power and gas they use. It covers most households, about 24 million in the UK, on a so-called standard variable tariff, and caps the level of profits an energy supplier can make at 1.9%. It has offered protection for those who haven’t been able to shop around and switch suppliers regularly. More savvy consumers have traditionally saved many hundreds of pounds per year by switching supplier.