The energy price cap is a limit set by Ofgem on the rates a supplier can charge customers on a standard variable tariff in Great Britain. It caps the unit rate and standing charge per fuel, and is reviewed every three months.
In one line: The energy price cap is Ofgem's quarterly limit on the unit rates and standing charges suppliers can charge on default tariffs.
How the energy price cap works
The cap limits the per-unit price and the daily standing charge, not the total bill, so a household that uses more energy still pays more. It applies to standard variable tariffs, not fixed deals agreed at a set price.
Ofgem expresses the cap as an illustrative annual figure for a typical household using a benchmark amount of gas and electricity, but the actual cap is the underlying rates. A home using twice the benchmark pays roughly twice that headline figure.
The cap is recalculated each quarter to reflect wholesale and network costs, so the rates can rise or fall between review periods.
Price cap vs a fixed tariff
The price cap governs default and variable tariffs that move with each quarterly review, whereas a fixed tariff locks rates for a set term regardless of cap changes.
A fixed deal can sit above or below the prevailing cap, and leaving one early may trigger an exit fee that capped variable tariffs do not carry.
Primary source: Ofgem: Energy price cap