Is there an energy price cap for business?

Ofgem has announced that the energy price cap will increase by 0.2% from January to March next year. That's a rise of about £3 on the current price cap - up from £1,755 to £1,758. Although only a modest increase, it still means higher energy bills for domestic customers who are on their supplier's standard variable rate tariff.

But remember, there is no price cap on business energy, only on domestic energy. 

Unlike domestic energy customers, businesses receive no government support for their energy bills. Although the Energy Bill Relief Scheme and Energy Bills Discount Scheme were introduced to help businesses during the height of the energy price crisis, no further government support has been given since these schemes ended in March 2024.

Below, there's more on how both schemes worked, but let's first look at how the energy price cap works and whether this can indirectly indicate where business energy prices are headed.

What is the energy price cap?

The energy price cap sets the maximum price that energy suppliers can charge domestic customers on prepayment and standard variable tariffs. 

The cap is reviewed and set every three months by Ofgem, the UK energy regulator. It factors in changes to wholesale energy prices, policy, network and operating costs, and prepayment meter costs.

Although usually described as the annual bill an average household on a dual fuel tariff would pay, the cap is actually a limit on the standing charge and unit rates. This means that household bills will be higher or lower than the advertised cap, depending on how much energy they use.

What is the current energy price cap level?

Until December 31 2025, the energy price cap per unit and the standing charge will be:

• Electricity - 26.35 per kWh (unit rate) and 53.68p per day (standing charge)
• Gas - 6.29p per kWh (unit rate) and 34.03p per day (standing charge)

When prices are adjusted for annual consumption, this means an average household on a standard variable tariff paying by Direct Debit can expect to pay £1,755 a year for gas and electricity. This is a £35 increase on the previous cap.

Between January and March 2026, the energy price cap per unit and the standing charge will be:

• Electricity - 27.69 per kWh (unit rate) and 54.75p per day (standing charge)
• Gas - 5.93p per kWh (unit rate) and 35.09p per day (standing charge)

Will the energy price cap increase?

The price cap increased by 2% from October 1. The summer price cap review saw prices drop for the first time in 12 months, but as we approach autumn and winter, prices are up again. 

This is despite wholesale energy prices being relatively stable and even falling in recent months. So why the increase?

Tim Jarvis, Director General, Markets, at Ofgem, said: “While energy prices have fallen in real terms over the past two years, we know people may not be feeling it in their pockets.  

“The price cap helps protect households from overpaying for energy. But it’s only a safety net and there are practical ways that customers can pay less for their energy.  

“Look at different tariffs and choose what’s right for you or change the way you pay to Direct Debit or smart pay-as-you-go. Prepayment remains the cheapest way to pay, and these customers are already saving around £47 on average. 

“While wholesale energy costs are stabilising, they still make up the largest portion of our bills, which leaves us open to volatile prices. That’s why we’re working with government and industry to boost clean energy and reduce our reliance on international sources we can’t control.”

The wholesale price is the amount suppliers pay for the energy they provide to homes and businesses. Ofgem figures show wholesale gas and electricity prices increased slightly in the last three months of 2024. There are more details in our guide to business energy price rises.

The way the energy market works also contributes to rising prices. Even though many suppliers use renewable sources, the price of electricity is directly affected by the price of gas. We explain why in our guide on how energy is bought and sold in the UK.

As the price cap only affects domestic energy rates, fixing your business energy rates is the only way to protect against price volatility. Our main business energy page has a breakdown of this month's business energy prices.

Speaking to BBC Radio 4 following the previous price cap announcement in April, Jarvis recommended that consumers should switch from standard variable rate tariffs to fixed rate tariffs to save money: "We are starting to see the market returning, which is very much welcome, and I would very much urge people to shop around. We're seeing fixed rate deals on the market now that are around £200 a year cheaper than the cap.

"Our advice to people would be to look at the fixed market because it does insulate you from this volatility and fluctuations in the price cap, and ensure that you know what you're paying. The price cap is a cap on rates and what suppliers can charge, but there are cheaper deals out there."

When is the next energy price cap review?

The energy price cap is reviewed every three months - February, May, August, and November. The new price cap is also implemented every three months - April, July, October, and January. According to Ofgem, the next round of price cap reviews will take place on the following dates:

• February 25, 2026 – period April 1, 2026 to June 30, 2026  
• May 27, 2026 - period July 1, 2026 to September 30, 2026
• August 26, 2025 - period October 1, 2026, to December 31, 2026

What is the business energy price cap?

There is no business energy price cap. The complexity of commercial energy contracts and the difference in usage between businesses mean that a cap on business energy rates would be difficult to set up.  

Unlike households, where most use gas and electricity for the same things but at different levels, the difference in how and when businesses use energy can be huge. 

Although a fish and chip shop and a car mechanic both need electricity, how and when they use this power is completely different. This is why there are no ‘off-the-shelf’ options for businesses and contracts need to be tailored to meet individual needs.    

This makes it more difficult to create a single blanket rate across all businesses, so there is no commercial energy price cap. 

When the government did offer support, schemes were designed to reflect the complexity of commercial energy contracts. This meant financial support was offered to all sizes and types of businesses. 

Do we need a cap on energy rates? 

Wholesale energy prices have been so volatile in recent years that households and businesses across the UK have been hit with record energy bills. A price cap is one way to help lower the amount customers pay for energy. But it’s not perfect. 

The energy price cap was introduced in 2019 to limit the amount suppliers could charge households on credit meters for gas and electricity. This came two years after the Safeguard Tariff, which caps the unit rate suppliers can charge anyone paying for gas or electricity in advance using a prepayment meter. 

The cap was brought in to end what (then Prime Minister) Theresa May described as “rip-off energy prices” that were being charged as a result of Britain’s “broken energy market”. 

Although it does help to control prices, the problem with this system is that it causes prices to bunch around the level of the cap. When the cap was introduced, the number of cheap energy deals (those that cost less than £1,000 per year) dropped by 90% during 2018, falling from 77 at the start of the year to just eight by the end. 

This made the domestic market a lot less competitive. The price cap was even cited as one of several reasons why some energy suppliers went bust or stopped trading over the last few years.  

How has the energy price cap changed?

There have been many changes to the level of the energy price cap since it was introduced in 2019. It was originally updated every six months, but market volatility saw Ofgem switch to quarterly updates from the start of 2023.

^{Note: Energy Price Cap levels above are based upon an average household paying a supplier's standard variable rate tariff by monthly Direct Debit.
*Although the price cap appeared to have dropped by £53, the actual reduction was just £17 due to a change in the way Ofgem calculates 'typical' household use. 
**A volatile energy market meant the Energy Price Guarantee was introduced alongside the Energy Price Cap. This ended in March 2024.}

What was the Energy Price Guarantee?

The Energy Price Guarantee was a government scheme that limited the price of gas and electricity for domestic consumers in the UK. It was in place from October 2022 to March 2024. 

It is often cited as capping household energy at £2,500 a year, but this figure was based on an average household paying by Direct Debit. The actual capped rates were 34.00p per unit of electricity rates at 10.30p per unit of gas rates at 10.30p per kWh. Standing charges were also capped at 46.35p for electricity and 28.49p for gas. This means that bills were higher or lower than the quoted £2,500, depending on energy usage and payment methods (paying by Direct Debit is usually the cheapest option). 

What was the Energy Bill Relief Scheme? 

The Energy Bill Relief Scheme (EBRS) is now closed. The Energy Bill Relief Scheme was a discount on business energy bills that ran for six months between October 1, 2022, and March 31, 2023. EBRS worked differently from a price cap. Instead of capping rates, the government limited the wholesale price that suppliers pay to generators for energy. 

The savings made by suppliers were passed on to consumers by a cut in the wholesale cost part of the unit rate on all business energy contracts signed after December 1, 2021. The discount was also applied to businesses on flexible, out-of-contract, and deemed rates.

What businesses were eligible for the Energy Bill Relief Scheme? 

The Energy Bill Relief Scheme was applied to all non-domestic contracts. This means it was open to all businesses, including voluntary and public sector organisations. 

There were some exceptions, such as power stations, grid-level battery storage facilities, or any business that uses gas or electricity to generate power that will be sold back to the grid. 

The only other condition was that all eligible businesses were on one of the following contracts: 

• An existing fixed price contract agreed on or after December 1, 2021. This includes contracts signed while the scheme is running. 
• Deemed rates, out-of-contract rates, or a variable tariff 
• Flexible purchase or a similar contract 

Check out our guide for more information on the available types of business energy contracts. 

What was the Energy Bills Discount Scheme (EBDS)? 

The Energy Bills Discount Scheme (EBDS) replaced the Energy Bill Relief Scheme (EBRS) on April 1, 2023. The new scheme offered a discount on non-domestic gas and electricity unit rates. The unit rate is measured in kilowatt-hours (kWh) and is the amount your business pays for each unit of energy it uses.

Who was eligible for EBDS?

EBDS was available to non-domestic customers on fixed-price contracts that were agreed on or after December 1, 2021, as well as deemed and out-of-contract rates. 

What to do if you can’t pay your business energy bills

If you're struggling to pay your business energy bills, then you should contact your supplier as soon as possible. Under Ofgem rules, the supplier must offer a reasonably affordable payment plan. You can find out more in our guide to business energy bills.

Should you fix your business energy rates? 

Although we can't predict what will happen to energy prices, fixing your rates is the only way to guarantee bill stability by locking in a consistent price for your energy and the current discount. 

Tim Jarvis, Director General of Markets, at Ofgem, echoed this when speaking on BBC Radio 4, "Prices are still high compared to historical norms. There’s a lot of volatility. The changes in prices are as a result of the changes in international markets. It does make this market difficult, so I would recommend people try and switch to protect themselves from these fluctuations.”

That’s where the tech-enabled experts at Bionic can help. We’ll compare rates from a panel of trusted UK suppliers to get our best available fixed rates for your business. If you need to fix your rates, call us now on 0800 084 1830 or head to our Business Energy page for more information on switching.