Avoiding the Price Cap

From the 1 July 2026, the price cap will increase by 13%. We have created full guide on what that means in real terms, which you can read here. On average, households may see their energy bills increase by over £200 a year from this increase alone. Unfortunately, this may not be the only energy price increase we see this year, as the price cap is re-evaluated twice more before the end of 2026. So, here’s how to avoid it.

What is the price cap?

The energy price cap was introduced in early 2019, and its purpose is to prevent residents from experiencing unjust energy price increases. Ofgem, the UK energy regulator, set the price cap largely based on wholesale energy costs to ensure that increases are fair and that decreases in wholesale energy prices are reflected in the price that residents pay for their energy. Currently, the price cap is reviewed every three months and is decided about one month before it comes into effect.

Energy Crisis Background

Wholesale prices are affected by a number of global factors. During the Coronavirus global pandemic, demand for energy fell in line with supply. But, towards the end of 2021, when restrictions started to ease and demand increased again, the supply of energy wasn’t back to full strength: this led to the largest price cap increase at that point; a small window into the increases to come. In February 2022, Russia declared its invasion of Ukraine and, with an energy supply market that still hadn’t recovered from the pandemic, this had a huge impact on global energy prices. Russia was one of the biggest exporters of gas so, although the UK did not export a lot of its gas directly from Russia, it affected wholesale costs from other countries due to the increase in demand. And it’s not just heating that is affected by gas prices – even as recently as 2025, over a quarter of UK electricity was generated by gas.

In April 2022, the price cap increased to see a typical household’s energy bills rise by around £700/yr. By October 2022, an additional temporary cap, the Energy Price Guarantee, had to be brought in to protect residents from the rising wholesale prices. This capped the maximum unit rate a domestic supplier could charge a resident even lower than the price cap during the height of the energy crisis. Without the Energy Price Guarantee, a typical household would have seen their bills rise to around £4000/yr. Unfortunately, with wholesale costs still soaring, a number of energy suppliers went bust.

Even with the Energy Price Guarantee, energy bills were still high, and energy debt began to rise rapidly. To help alleviate the cost of heating, Winter 2022/23 also saw a temporary support payment applied to all households, the Energy Bill Support Scheme, which provided a payment of £400 towards residents’ energy bills.

Since mid-2023, energy bills have started to stabilise. This allowed suppliers to start offering competitive rates and fixed tariffs again. However, there are still around 33 million domestic customers on the Standard Variable Rate, meaning that they are out-of-contract, are being charged at the price cap and are vulnerable to the volatile wholesale market.

Am I affected?

If you do not have a fixed tariff, then you will be affected by the price cap. You can contact your supplier or check your energy bill to see what tariff you are on. If you are out of contract, then you will currently be on a variable tariff which will mean you are charged at (perhaps very slightly under) the maximum rate as determined by the price cap and it will go up when the price cap goes up. If you are on a tracker tariff, then your rate will also go up with the price cap, although will usually be charged at a pre-established percentage below the price cap. Some tracker tariffs may have their own cap that could be below the new price cap, but it is important to check your contract or with your supplier to see if this is the case.

If you are on any type of fixed contract, then you will go on to the price cap as soon as your contract finishes. If you plan to renew your contract after the new price cap comes into effect on 1 July, then it is very likely that any deals that you are offered will be at a higher rate than your current contract.

How can I avoid it?

Fix your energy rate now!

Go on to an impartial comparison site and see what deals are available. Make sure to check the actual rates that they are offering and compare them to the new price cap. Most comparison sites show an annual yearly saving based on your current tariff. Remember that, if you are on a variable rate, this will be going up in July so your savings could be higher than what they are showing. Comparing unit rates and standing charges directly to the July price cap will help you get a clear picture of whether it’s a good deal.

If you are in contract, but your contract expires in the next couple of months, then look at switching early before the new price cap starts. You can’t be charged early exit fees if you have less than 50 days (49 days or less) left on your contract. Energy deals will go up from 1 July, so renewing your contract or switching to a new contract early could save you a lot of money.

If you are in contract and your contract doesn’t expire soon, you could still look at switching. We know that energy prices are going up by 13% in July until the end of September. Currently, it is predicted that the price cap could go up again in October, although this is just a guess and could change. If your contract runs out mid-winter, or if you’re on a tracker tariff, then you might be better off paying the exit fees and locking in a new fixed deal. Our advisors can help you calculate the cost of switching (exit fees) compared to the cost of not switching.

Can I switch?

• If your name is on the energy bill, then you have the right to choose your own tariff: this includes if you rent. If your bills are included in the rent, then you won’t be able to decide on your tariff.
• If you are on a pre-payment meter, then there is a more limited choice for fixed tariffs but there are some.
• If you already have a smart pre-payment meter, then it is usually quite simple to move onto a standard meter that would allow you access to more tariff options with direct debit. It’s important to weigh out the pros and cons of changing payment type. We have a guide that can help you decide what’s best for you.
• If your home is part of a heat network, then you can’t choose your tariff for your heating, but you can still switch your electricity deal.
• If you pay on receipt of bill or don’t have a smart meter, then there are still some fixed tariff options available, but the best deals will be for people who pay by direct debit and have a smart meter.
• If you have energy debt then you may not be able to switch supplier, but you might be able to fix your tariff with your current supplier.
• Make sure to learn about different tariff types that could benefit you, such as time of use or EV tariffs. Our advisors can help you decide what tariff type might work best.

Other support

If you are struggling with your energy bills, or are concerned about the new price cap, then give Act on Energy a call for free on 0800 988 2881. We can advise you on how to avoid it, how to reduce your energy bills, and of any support schemes that are available to you.

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