What does Energy Price Cap mean and what is it in 2021?

The Energy Price Cap is an upper limit on what any energy supplier can charge per year. The UK is split into 14 unique regions, each with their own unique energy price caps that vary depending on how you pay. These cap prices for gas and electricity are determined by Ofgem, a government body that regulates energy suppliers in the UK to ensure fair competition amongst suppliers and keep energy costs affordable. Sounds helpful, right? Keep on reading to find out more.
Last updated: November 2021

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Although the Energy Price Cap is in place, that doesn’t necessarily mean that the price dictated by the cap is the best market rate. Indeed, the Energy Price Cap was implemented specifically to help consumers who are on default or standard tariffs, which invariably have the worst rates. Savvy consumers can often get energy tariffs that offer significantly lower annual energy costs. This is why it is important to compare energy prices, before choosing a supplier and a tariff.

While the Energy Price Cap was developed to limit the prices that suppliers could charge to their consumers, it does not mean that it is fair market rate. In fact, it’s quite the opposite, it is the maximum price that energy suppliers in the UK are allowed to charge you on your default tariffs before they are penalized and fined by Ofgem.

There are actually a wide variety of energy suppliers with tariff options that are well below the energy price cap, and switching to one of these energy plans happens to be one of the great ways to reduce your energy costs. Here at Switch Plan, we’re so passionate about helping consumers just like you to get the best possible deal on their electricity and gas. Navigating the energy market in the UK can be confusing and stressful, so instead let our UK energy experts handle that for you!

No two energy suppliers are completely alike, and not every supplier may be able to fulfill your needs as well as others. As energy costs vary so greatly across all of the UK suppliers, you might well wonder what factors impact their prices.

What is the current Energy Price Cap?

As of October 2021, the average Energy Price Cap in the UK for those that pay with direct debit has been set at £1,277 per year for dual fuels, a £139 increase from the price cap established by Ofgem in April, 2021.
Prepayment customers will also have their price cap increased to £1309, a £153 increase from the previous prepayment price cap.

This means that now prices have been restored to pre pandemic level of costs, a decision that has been defended by the Chief Executive of Ofgem since its announcement.

What this price cap means that your annual bill cannot exceed this amount. If it does, then you are encouraged to report it to Ofgem who will investigate the matter and potentially get you reimbursed.

In the table below, you can see what the national average Energy Price Cap has been set to for customers paying with direct debit for dual fuel in the past:

Date Energy Price Cap Amount
January 2019 £1,137
April 2019 £1,254
October 2019 £1,179
April 2020 £1,146
October 2020 £1,042
April 2021 £1,138
October 2021 £1,277

Is the Energy Price Cap the same every year?

No, because the cost of living (and the cost of supplying energy) are constantly changing, the Energy Price Cap is always changing to reflect that. Ofgem constantly reviews the cap and revises it every 6 months. Once in April for the start of the financial year, and again in October.

What is the Energy Price Cap of my area?

Is the energy price cap the same everywhere?

No, it is not, there are 14 unique regions in the UK that each offer three energy fuel types; single rate electricity, dual rate electricity & gas. Each of these fuel types have three different price caps that correspond with with three different payment methods. The three payment methods that each have their own price cap are standard credit (also called paying upon receipt), prepayment, and finally “other payment methods” (which includes Direct Debit).

This means that there are actually 126 different price caps that need to be acknowledged by every energy supplier in the UK. Any supplier that charges over the price cap can be fined by Ofgem, the governing body that oversees energy suppliers and sets the energy price cap. This can seem complex, but with the right resources, this information could potentially help you save on your energy bill!

Energy Price Cap of Gas

First we are going to look into the price caps associated with the costs of Gas in the UK. Gas is one of the most important energy fuels required to keep our homes comfortable and warm, it is an essential utility that keeps us being productive. However, it can also be expensive particular during times such as winter when it is in high demand.

Here we compile all of the gas price caps in each of the 14 regions within the UK:


Region Fuel Type Standard Credit Price Cap Prepayment Price Cap Other Payment Methods Price Cap
North West Gas £ 593.78* £ 577.46* £ 552.92*
Northern Gas £ 585.10* £ 567.37* £ 542.79*
Yorkshire Gas £ 586.47* £ 570.55* £ 545.98*
Northern Scotland Gas £ 589.83* £ 573.72* £ 549.17*
Southern Gas £ 608.84* £ 591.68* £ 567.21*
Southern Scotland Gas £ 589.81* £ 573.71* £ 549.15*
N Wales and Mersey Gas £ 596.45* £ 579.98* £ 555.45*
London Gas £ 611.10* £ 593.82* £ 569.35*
South East Gas £ 594.94* £ 578.55* £ 554.02*
Eastern Gas £ 595.28* £ 578.87* £ 554.34*
East Midlands Gas £ 587.03* £ 571.08* £ 546.52*
Midlands Gas £ 594.20* £ 577.85* £ 553.32*
Southern Western Gas £ 612.28* £ 594.93* £ 570.47*
South Wales Gas £ 609.54* £ 592.34* £ 567.87*


* Based on the Typical Domestic Consumption Values (TDCV) defined by Ofgem. On average: 2,900 kWh of electricity and 12,000 kWh of gas per year.


Energy Price Cap of Single Rate Electricity

Single rate electricity is one of the most commonly used fuel types in all of the UK, it’s pricing cap has implications on millions of households and has the potential to be a direct contributor to fuel poverty, an issue that has been plaguing the UK for some time. The price caps are designed to be a fair and affordable blend to ensure that the supply and demand or electricity does not lead to energy suppliers overcharging their customers.

Below you can see the price caps for single rate electricity in all 14 regions within the UK:


Region Fuel Type Standard Credit Price Cap Prepayment Price Cap Other Payment Methods Price Cap
North West Single Rate Electricity £ 680.18* £ 640.42* £ 635.57*
Northern Single Rate Electricity £ 689.25* £ 648.98* £ 644.16*
Yorkshire Single Rate Electricity £ 686.67* £ 646.56* £ 641.73*
Northern Scotland Single Rate Electricity £ 710.69* £ 669.23* £ 664.51*
Southern Single Rate Electricity £ 694.93* £ 654.36* £ 649.57*
Southern Scotland Single Rate Electricity £ 689.12* £ 648.87* £ 644.06*
N Wales and Mersey Single Rate Electricity £ 731.15* £ 689.49* £ 683.93*
London Single Rate Electricity £ 694.88* £ 654.31* £ 649.52*
South East Single Rate Electricity £ 720.23* £ 678.24* £ 673.57*
Eastern Single Rate Electricity £ 700.17* £ 659.30* £ 654.54*
East Midlands Single Rate Electricity £ 683.19* £ 643.28* £ 638.43*
Midlands Single Rate Electricity £ 695.73* £ 655.11* £ 650.33*
Southern Western Single Rate Electricity £ 727.25* £ 684.87* £ 680.23*
South Wales Single Rate Electricity £ 712.08* £ 670.55* £ 665.84*


* Based on the Typical Domestic Consumption Values (TDCV) defined by Ofgem. On average: 2,900 kWh of electricity and 12,000 kWh of gas per year.


Energy price cap

Energy Price Caps for Dual Rate Electricity in the UK

Dual rate electricity, often referred to as E7 electricity because they are only available to homes that have Economy 7 meters, is becoming an increasingly popular tariff option for households that use more energy at night. This is because dual rate electricity tariffs have one unit rate for peak hours of energy consumption, such as during the day, and a second unit rate for off-peak hours of consumption, such as at night.

Here we will go over the price caps associated with dual rate electricity in each of the 14 regions in the UK and break them down by payment method for your convenience:


Region Fuel Type Standard Credit Price Cap Prepayment Price Cap Other Payment Methods Price Cap
North West Dual Rate Electricity £ 895.16* £ 843.72* £ 839.24*
Northern Dual Rate Electricity £ 910.08* £ 857.81* £ 853.40*
Yorkshire Dual Rate Electricity £ 907.90* £ 855.75* £ 851.34*
Northern Scotland Dual Rate Electricity £ 943.69* £ 889.55* £ 885.30*
Southern Dual Rate Electricity £ 912.24* £ 859.86* £ 855.47*
Southern Scotland Dual Rate Electricity £ 910.84* £ 858.53* £ 854.13*
N Wales and Mersey Dual Rate Electricity £ 963.35* £ 908.14* £ 903.97*
London Dual Rate Electricity £ 907.40* £ 855.28* £ 850.87*
South East Dual Rate Electricity £ 939.18* £ 885.31* £ 881.03*
Eastern Dual Rate Electricity £ 912.66* £ 860.25* £ 855.86*
East Midlands Dual Rate Electricity £ 901.82* £ 850.01* £ 845.57*
Midlands Dual Rate Electricity £ 919.68* £ 866.88* £ 862.52*
Southern Western Dual Rate Electricity £ 955.59* £ 900.80* £ 896.60*
South Wales Dual Rate Electricity £ 939.94* £ 886.02* £ 881.75*


* Based on the assumed use of 4,200kWh per year


What does the Energy Price Cap mean?

The Energy Price Cape is currently set up in a unique way in that it offers different price depending on a number of factors including fuel type, location and even payment method. As a result there is actually several energy price caps rather than just one set cap, this was done intentionally to ensure healthy competition within the energy industry throughout the UK and to ensure customers were being charged fairly.

What this means is that the maximum price that an energy company is allowed to charge their customers can be different from city to city as a result of regional differences or even from neighbor to neighbor depending on their payment methods. The implication of this is that if you are not carefully selecting your energy tariff plans and payment methods, you may be paying more than you need! ​

Why was the Energy Price Cap made?

Many younger consumers may not remember this, but prior to the 1990s the national energy grid and marker were run by the government. Then, in 1990 the UK energy market (including the creation and supply of energy in England and Wales) was privatised under Margaret Thatcher’s government. It was hoped that privatisation would result in better choice for consumers and better quality of service as a result of direct competition between energy suppliers. Whether or not this measure succeeded is open for debate, one thing’s for sure; energy prices rose exponentially over the ensuing 30 years.

Even as (relatively) recently as 2004, the average home paid just £277 for gas and £288 for electricity. Around £565 on total. A decade later, average dual fuel costs have more than doubled to £1,344. As prices continued to increase, consumers on low and fixed incomes began to struggle to meet the rising costs of energy. Those on default or standard tariffs are most commonly at risk of being seriously affected.

Even though Office of Gas and Electricity Markets (Ofgem) was established to act as a regulatory body in 2000, it placed no restrictions on what energy suppliers could charge at the time, and because the free market is a free market, energy suppliers had complete autonomy over their pricing.

However, in January of 2019, Ofgem finally intervened to limit the energy prices that were being suppliers in the UK were charging their customers. While some may argue how effective it is when it comes to boosting healthy competition or supporting low income households, there is certainly no denying that it was a necessary step to ensuring fuel poverty levels in the UK do not continue to rise.

What happens if companies don’t obey the Energy Price Cap?

The Energy Price Cap is mandatory, and not simply something that energy companies can choose to enter into voluntarily. As such, there are harsh penalties for breaching the Energy Price Cap.

As Shell Energy found out in mid-2019.

The company (which had rebranded after acquiring First Utility) was found to have overcharged around 12,000 electricity and gas customer accounts to the tune of £100,736.63 collectively.

Once the breach was discovered by Ofgem, it had to not only refund all the 8,800 customers that had been affected, it also had to make a payment of £200,000 to Ofgem’s Consumer Redress Fund. The total payment was around £390,000. You can read more in this press release from Ofgem.

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Is there a downside to the energy price cap?

The energy cap is designed to protect consumers and ensure that they never have to pay over-inflated energy prices. But is there a downside to this cap for anyone other than energy company stakeholders?

While few consumers are sympathetic to the plight of big energy companies, those with a strong ecological and ethical focus will want to spare a thought for a way in which the Energy Price Cap could theoretically hurt energy companies.

One potential concern among those in the energy market is that potentially reduced revenue won’t just be taken out of executives’ bonuses. It’ll be taken out of important areas like research and development. In an age where greener energy is a high priority for energy companies and consumers alike, it’s important to be able to invest sufficient capital into finding new ways to create cleaner, greener energy without relying on finite natural resources.

This is why Ofgem looks at a number of factors in order to ensure that the Energy Price Cap results in fair energy prices for consumers, while also allowing energy companies sufficient potential margins to be able to operate in innovative ways. Ofgem has significant data on how much it costs energy companies to operate, and it requires all energy companies to publish annual statements detailing their revenues, costs and profits. You can find out more information about this here.

No more overspending on your energy!

Is your current bill dangerously close to the Energy Price Cap? We can help!

The Energy Price Cap is an extremely helpful way of ensuring that energy suppliers charge their customers fairly, but that doesn’t mean that your energy bills can’t be cheaper! Especially if energy costs are at or close to the current Energy Price Cap.

In many cases, changing to a new tariff and/or new supplier could save you £100+ on the 2021 Energy Price Cap.

Not everyone is financially recovered from impact of the Covid-19 Pandemic, so while prices are starting to rise now is the best time to switch if your energy costs are too high!

We can help to manage every aspect of your move from end-to-end. No hassle, no headaches… All you can have to do is sit back. Relax. And enjoy your incredible energy savings that are well below the Energy Price Cap!

Sound good?

Call us today on to find out more. We’re available from 8.30 am to 5.30 pm.

If you want to read more on this topic, check out these guides:

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FAQ

How is the Energy Price Cap Calculated?

In order to ensure that the Energy Price Cap is fair, Ofgem bases its calculations on the cost of supplying energy to homes that are incurred by energy providers. This might include everything from wholesale energy costs to the costs of maintaining the network, environmental / social costs and other operational costs that come with doing business.

As such, it helps to ensure that they are able to remain profitable while also preventing consumers from being unfairly charged.

When does the Energy Price Cap change?

The Energy Price Cap is re-evaluated every April (the start of the financial year) and October. This helps to ensure that it is well matched to the cost of living for consumers, as well as the cost of supplying energy incurred by the companies.

How much is the Energy Price Cap for 2021?

At the time of writing the UK Energy Price Cap is set at £1,277. This has been set since October of 2021. However, this will change in April 2022 when it is re-evaluated.

Is the Energy Price Cap the lowest price on the market?

Not at all! The cap was designed to help consumers with standard or default tariffs. These almost never offer the best value for money. In fact, even with the newly reduced cap, there are still dozens of tariffs on the market that could save you hundreds of pounds on your energy bill. Let us find the perfect new supplier and tariff for you! We can even handle every aspect of your move for your convenience and peace of mind.

Updated on 22 Oct, 2021

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