Ofgem energy price cap explained - how you can beat it and save hundreds

Millions of households are set to be hit with another rise in energy bills, just as temperatures usually start to tumble - but there are things that can be done to beat it.

Energy regulator Ofgem will confirm the level of its latest price cap on Wednesday, which will kick in from October 1. Industry experts at Cornwall Insight have predicted the cap will edge up 1%, adding around £17 to a typical household’s annual gas and electricity bill, and taking it to £1,737 per year.

It previously estimated the cap would drop by 1% from the current £1,720 because of easing Middle East tensions. Cornwall said its forecast reflected changes it assumed Ofgem would be introducing in the upcoming cap period, including the expansion of the Warm Home Discount scheme for vulnerable households that would add around £15 to a typical bill, while also providing £150 in support to 2.7 million additional people.

READ MORE: Smart meter compensation rules revealed as Ofgem details what you can claim for

READ MORE: Five money changes happening in September that could save you £1,000s

But just what is the price cap, how might it impact you, and how can you beat it?

What is the price cap?

Ofgem launched the energy price cap in January 2019 to try to prevent households on standard variable or other default energy tariffs from being overcharged. It is designed to make sure prices for people on these are fair and reflect the cost of energy.
You are covered by the price cap if you pay for your electricity and gas by either standard credit (which means you pay when you get your electricity and gas bill), direct debit, or are on a prepayment or Economy 7 meter.

As of April, Ofgem said around 21 million standard variable tariff direct debit accounts, about eight million standard credit accounts, and seven million prepayment meter accounts came under the scope of the price cap.

The price cap limits the maximum amount energy suppliers can charge you for each unit of gas or electricity you use. Importantly it doesn’t limit the overall amount you can be charged, which depends on your usage and where you live in the country.

The cap is reviewed every three months by Ofgem. This latest covers the period from October 1 to the end of December, when it will be looked at again. That’s why the average annual estimates quoted are a bit confusing as they will change depending on what happens in the months ahead.

How do I know what I will be paying?

If you’re one those impacted, your supplier should let you know what will happen to your tariff over the next year. It is important that you know your own personal situation, so look online if you can, or call your supplier, to find out what your estimated bill is for the next year, after the price cap comes in.

How can I beat the price cap?

There was a time, when wholesale energy prices were soaring after Russia’s invasion of Ukraine, that being on the price cap made sense. In fact, very few suppliers at the time were offering anything other than their standard tariffs, or at least any that made financial sense.

But all that has thankfully changed and there are plenty of cheaper deals around. The best option for many is a fixed price energy tariff, which means your unit price for gas and electricity will not change for the duration of the plan. If you have a fixed price plan and your supplier announces a price rise, your rates will not change.

Ofgem says that, as of April this year, there were 19 million customers were on fixed rated deals.

How much could I save?

If you’re on a standard variable tariffs, and you don’t want to switch supplier, then see what fixed deals your current provider has. It could just be a case of switching you over. Alternatively - and as well as that - have a look at what deals you could get elsewhere.

According to website The Energy Shop, the cheapest deal is around £273 a year less than what Ofgem’s price cap is forecast to be from October 1. Those are averages, so always compare what your estimated usage over the next year will be to get a better idea.

The Energy Shop says these are the current best buy deals:

• * Outfox EnergyFix’d Dual Aug25 12M v4.0£ 1,464.52
• * Outfox Energy2-year Fix’d Dual Aug25 v4.0£ 1,466.52
• * Outfox EnergyFix’d Dual Aug25 15M v4.0£ 1,468.52
• * EcotricityEcoFixed 1 Year Green Tariff July 25 V6£ 1,539.70
• * OVO energy1 Year Fixed + Boiler Cover 19 August 2025£ 1,592.13
• * E.ON NextNext Secure Fixed 12m v30£ 1,602.43
• * So EnergySo Eucalyptus One Year – Green£ 1,615.86
• * So EnergySo Eucalyptus Two Year – Green£ 1,642.61
• * E.ON NextNext Fixed 12M V77£ 1,648.24
• * British GasFixed Tariff v90£ 1,650.38
• * OVO energyOnline Exclusive 19 August 2025£ 1,660.72
• * Octopus EnergyOctopus 12M Fixed August 2025 v1£ 1,661.55
• * Co-op EnergyCo-op 12M Fixed August 2025 v1£ 1,661.55
• * Sainsbury’s EnergySainsburys Fix and Reward Fixed 12m v56£ 1,676.88
• * E.ON NextNext Free Boiler cover Fixed 14m v9£ 1,683.27
• * OVO energy1 Year Fixed 19 August 2025£ 1,693.60
• * E.ON NextNext Gust 12m V33£ 1,694.31
• * Scottish PowerHelp Beat Cancer Fixed Aug 2026 TM5£ 1,694.43
• * British GasThe Longer Fix v39£ 1,705.41

In recent days, EDF has updated its cheapest deal with a new Simply Fixed Aug26v11 tariff, which is priced at £1,634 for an average dual fuel customer. EDF thinks Ofgem’s price cap will be more like £1,744 over the next year.

How else can I save money?

Figures from the Department for Energy Security and Net Zero show that around 12%, or 3.4 million households choose to pay by standard credit, commonly known as “paying on receipt of bill”. But doing so means you are often penalised, as suppliers generally charge more. On the flipside, those who pay by monthly direct debit are charged less.

Ofgem’s price cap for July to October this year is quoted at £1,720 for typical direct debit customer, but £1,855 for someone on standard credit - or £135 a year more.

According to Moneysupermarket, households could collectively be paying as much as £459million a year more than direct debit customers. Worse still, it is more common for older people to choose to pay on receipt of bill. For pensioners who are on their supplier’s SVT, the extra cost will wipe out as much as 69% of their winter fuel allowance if they don’t take action, says Moneysupermarket.

How else can I save money on my energy?

Moneysupermarket’s has produced these extra tips.

• * Switch it off - Switching off unused lights and appliances could save up to £537 a year.
• * Swap it out - Replacing your bulbs with LED ones could save you £45 a year.
• * Plug the draught - Stopping heat from escaping through unwanted gaps could help you save up to £40 a year, but you could save more with professional draught-proofing.