The Ofgem price cap does not put a limit on how much you can pay for energy – instead, it sets the maximum unit rate and standing charges
Energy bills are falling from April(Image: GETTY)
Energy bills are set to fall for millions of households this spring after Ofgem announced its new price cap.
The price cap is falling from £1,758 to £1,641 for the typical household from April 1 – a reduction of 7%, or £117. However, the exact amount you pay depends on how much gas and electricity you use.
For every £100 you currently spend on energy, you will spend around £7 less from April. The decrease is down to measures announced by the Government in the autumn Budget last November.
Chancellor Rachel Reeves revealed that £150 would be cut from energy bills from April by removing the Energy Company Obligation and Renewables Obligation.
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However, some of this saving has been offset by other costs that are added to bills, including network maintenance. Wholesale prices have also risen slightly.
Ofgem updates its price cap every three months, so the new rates will remain in place until June 30, when it will then be revised again.
But despite the fall, households are still being advised that they can save money by switching to a fixed tariff deal.
Richard Neudegg, director of regulation at Uswitch.com, said: “Customers switching to a cheap fixed tariff could see their bills up to 19% cheaper than today’s standard rates once the reduction kicks in, compared with the 7% reduction from simply sticking with the price cap.
“There are currently 30 fixed energy deals on the market that undercut the current price cap. With savings of up to £260 for the average household, taking action is a must – and their rates will get even cheaper from April.”
Tim Jarvis, Director General, Markets at Ofgem, said: “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.“
What is the Ofgem price cap?
Despite what its name suggests, the Ofgem price cap does not put a limit on how much you can pay for energy – instead, it sets the maximum unit rates and standing charges.
The standing charge is a fixed fee you pay to be connected to the grid. This means your bill is still based on the amount of energy you use, and it can be higher or lower than the headline price cap figure.
The price cap figure represent what the typical billpayer can expect to pay, based on how much energy Ofgem estimates that the average household uses.
Your location can also effect your bill, as unit rates vary depending on region. There are also different rates for prepayment customers and those who pay on receipt of bill.
Confusingly, the energy price cap figure represents a yearly bill, but it is updated every three months so Ofgem can reflect changing wholesale costs.
What are the new unit rates and standing charges?
The average unit rate for gas is falling from 5.93p per kilowatt hour (kWh) to 5.74p per kWh, while the standing charge is decreasing from 35.09p a day to 29.09p.
The average unit rate for electricity is falling from 27.69p per kWh to 24.67p per kWh. The standing charge is rising from 54.75p a day to 57.21p a day.
Who is covered by the Ofgem price cap?
The Ofgem price cap covers anyone on a standard variable rate (SVR) tariff. You are likely on an SVR tariff if you are not fixed into an energy deal.
There are about 33 million standard variable tariffs customer accounts, including six million with prepayment meters. You can contact your current energy supplier to see what type of tariff you are on.
But unusually, the savings announced today will also apply to fixed rate tariffs due to the change in policy costs.
If you are fixed rate customer, you do not need to do anything – your energy supplier will be in touch to outline the changes to your tariff.
How does Ofgem calculate its price cap?
The largest cost that makes up the price cap is wholesale energy, which is what energy suppliers pay for gas and electricity.
The assessment period for wholesale energy prices for the April 2026 price cap was November 18, 2025, to February 17, 2026.
There are other elements that are taken into account as well – for example, maintaining pipes and wires that carry gas and electricity, network and operating costs, as well as VAT, payment method allowances and profits for the energy supplier.
Ofgem will announce its July price cap by May 27, 2026.
Will energy bills keep going down?
Cornwall Insight said earlier this month that wholesale prices have risen slightly due to “geopolitical factors” – but the group predicts the price cap to remain “relatively steady” throughout 2026. They predict “a small rise” in energy bills in July.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight, said: “Any reduction in bills is positive, easing pressure at a time when affordability really matters.
“It’s the drop in policy costs, as a result of Government interventions, that is doing most of the heavy lifting and, while wholesale costs have come back into the headlines in recent weeks, the impact on April’s bills is minimal.
“The real test will be keeping those savings going. That won’t be easy as the UK continues to upgrade its networks and infrastructure. That investment is needed if we want an energy system that is more secure and resilient.”
