What Does the New Energy Price Cap Mean for Business Energy Prices?

What is the current energy price cap?

From today, 1 July 2026, Ofgem's price cap is £1,862 a year for a typical household. That's up 13% from £1,641 in the previous quarter. It's the biggest quarterly jump since 2022.

Ofgem has also updated its Typical Domestic Consumption Values from today, to reflect the fact that average household energy use has fallen. Under those updated figures, the cap is £1,663 a year. Source: Ofgem.

The main driver is higher wholesale gas prices, linked to ongoing conflict in Iran and its impact on global energy supply routes.

The next cap, covering October to December 2026, will be published by 26 August 2026.

Source: Ofgem. Annual figures based on a typical domestic household paying by Direct Debit. Includes VAT at 5%. Business energy unit rates are agreed directly with suppliers and will differ. Percentage changes above are calculated from unit rates. Ofgem's own summary figures (around 5% for electricity, 24% for gas) blend in standing charges and reflect the average household bill rather than unit rate movement alone. View the full breakdown on Ofgem's website.

Gas is where the movement is sharpest. The unit rate's risen 27.7% in a single quarter, from 5.74p to 7.33p per kWh. That reflects a significant shift in wholesale gas prices, driven largely by supply uncertainty linked to the conflict in Iran and disruption to key shipping routes. Electricity is up too, at 5.8%, but that's more modest. Standing charges on both fuels are broadly flat.

These are domestic rates, so they won't be what you're paying directly. But they come from the same wholesale market your supplier buys from. When input costs move this sharply, business quotes at renewal tend to follow. That's particularly true if you're in manufacturing, hospitality, or any sector that relies on commercial heating or kitchen equipment.

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What is the energy price cap?

The energy price cap is set by Ofgem, the UK's energy regulator. It limits the maximum unit rates and standing charges that suppliers can apply to domestic customers on standard variable or default tariffs.

It was introduced in January 2019 to protect households from being overcharged when they're not on a fixed deal. The cap doesn't limit total bills. A household using more energy than the typical amount will still pay more than the capped figure.

Ofgem reviews the cap every three months, adjusting it to reflect changes in wholesale energy costs, network charges, operating costs, and government policy levies.

Does the energy price cap apply to businesses?

No. The energy price cap applies to domestic customers on default or standard variable tariffs. Business energy contracts aren't covered.

Most businesses agree fixed-term or bespoke contracts directly with suppliers. There's no equivalent Ofgem price cap for business energy, and there hasn't been since the government's Energy Bill Relief Scheme and Business Energy Support Scheme ended in March and April 2023, respectively.

That said, the cap isn't irrelevant to you. The wholesale market movements that drive cap changes are the same forces that influence what you're quoted when your contract comes up for renewal or you switch suppliers. So when the cap rises sharply, it's often a signal that business prices are under pressure too.

What drives changes to the energy price cap?

Wholesale gas prices rose sharply earlier this year, after the conflict in Iran created uncertainty around key international supply routes, including the Strait of Hormuz, which handles around 20% of global oil and LNG shipments. That's fed directly into the July cap. Network and policy costs tend to be more stable, though they can shift with infrastructure investment and government decisions.

When wholesale gas prices rise, as they have through mid-2026 due to global market conditions, this feeds through directly into a higher cap. Network and policy costs tend to be more stable, though they can shift with infrastructure spending and government decisions.

What does the price cap mean for business energy costs?

The cap doesn't set your prices directly. But the wholesale market behind it has moved significantly this quarter, and that tends to flow through into what you're quoted at renewal, particularly on gas. 

If your contract's ending in the next six months, it's worth comparing now rather than waiting. The quote available today may look quite different from the one available when your deal actually runs out.

Compare your business energy options across a panel of suppliers, or look specifically at business electricity and business gas separately.

How can businesses manage energy costs when prices are rising?

A few approaches are worth considering, and none of them requires specialist knowledge.

Compare at renewal and before it. Prices vary between suppliers even in a high-price market. Comparing across a panel of suppliers gives you a clearer picture of what's available, rather than just accepting whatever your current supplier offers.

Consider a fixed-rate contract. Locking in a rate when wholesale prices are stable can protect you from future rises. It also makes budgeting simpler. The trade-off is less flexibility if prices fall. Take a look at your business electricity options or business gas contracts to see what's on the market.

Review your usage. Reducing consumption is the one lever that works regardless of what the market does. Even modest efficiency improvements can offset higher unit rates.

There's no single right answer. The best approach depends on your usage, your appetite for price certainty, and when your current deal ends. What helps is having a clear picture of your options before you need to make a decision.

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