What Ofgem’s Price Cap Review Is Actually About
Ofgem has opened a price cap review that will run for the next two years, and it isn’t about whether your bill goes up or down this winter. That’s still decided every three months by wholesale costs. This price cap review is about the plumbing underneath the cap: the rules that decide how costs get shared out between customers in the first place.
Your supplier won’t be rushing to explain this bit. It doesn’t make for a catchy email. But if you’ve ever wondered why paying by direct debit is cheaper than paying by cheque or a prepayment meter, this is where that gap finally gets a proper look. Worth five minutes, even if nothing changes for a while yet.
Why Is Ofgem Reviewing the Price Cap Now?
Because the regulator thinks the market has moved on since the cap’s design in 2019, and the rules need to keep up. Ofgem published its discussion paper on the future of the price cap review in August 2026 (checked August 2026), setting out a programme of work stretching into 2028. It says the cap has broadly done its job, protecting households from being quietly moved onto expensive default tariffs. But it also thinks some of the assumptions underneath it are due a rethink.
Three things are driving this price cap review: half hourly settlement, which has been rolling out across Great Britain since 2025 and gives suppliers a much more accurate picture of when each household actually uses power; a rise in smart, time of use tariffs that reward flexible energy use with cheaper rates outside peak hours; and long running questions about how much different types of customer pay towards costs that have nothing to do with their own usage.
The cap itself has been through a lot since it launched in January 2019. It was designed to stop people on default tariffs being quietly overcharged, then got stretched almost beyond recognition by the 2021 to 2023 energy crisis, when wholesale prices spiked and the cap level followed. Ofgem’s view now is that the underlying rulebook hasn’t had a proper structural review since, even though the market it’s regulating looks quite different.
How the “Bad Debt” Charge Ends Up on Your Bill
Here’s the part most people have never heard of. When energy customers can’t or don’t pay their bills, suppliers don’t just absorb the loss. That cost gets built into everyone else’s price cap allowance instead, spread across the market as a “bad debt” charge. It sits quietly inside your standing charge and unit rate, next to wholesale costs and network fees, and nobody ever puts it on the bit of the bill you actually read.
It isn’t spread evenly. Direct debit customers are treated as lower risk, so they carry a smaller share. Standard credit customers, and people on prepayment meters, already tend to pay more towards the same fixed costs, often on top of a bill that’s higher to start with because prepayment tariffs sit above the direct debit cap level too.
This price cap review is asking whether that split is still fair, whether “levelising” it (industry jargon for spreading it more evenly across payment types) should happen at all, and if so, how fast. Ofgem hasn’t ruled either way yet. It’s a discussion paper, not a decision.
Will This Change What You Actually Pay?
Possibly. Eventually. Not this winter, though. Ofgem’s programme runs across the next two years, with work on supplier operating costs and the bad debt split continuing well into 2027 and 2028. Nothing in this price cap review changes the level for October 2026, which Ofgem confirms separately, and which is due by 26 August 2026 as usual.
If the balance does eventually shift, the likeliest outcome is that the direct debit discount narrows a little, rather than standard credit or prepayment charges dropping to match it exactly. Treat any specific figure you see quoted online as a rough estimate at this stage, not a promise. Nobody, Ofgem included, has published a final number yet.
What Happens Next, and When
Key takeaways
- Ofgem’s price cap review is a multi year look at the cap’s rules, not a change to your bill this quarter.
- It centres on how “bad debt” costs are split between direct debit, standard credit and prepayment customers.
- The October 2026 cap level is still confirmed separately, by 26 August 2026.
- Half hourly settlement and smarter, time of use tariffs are part of the same wider rethink.
Ofgem says it’ll keep working with government, suppliers, consumer groups and the public as the price cap review develops, with more detail expected through 2027. It’s also reviewing suppliers’ operating costs generally, another quiet line item that eventually feeds into what everyone pays.
For now, the most useful thing you can do isn’t wait around for a review that won’t land for a while yet. Check how the price cap works today, and compare that against what a typical household pays, so you know where you actually stand right now.
Your supplier isn’t going to chase you about switching payment method or checking for a better deal. That’s the whole point of the Do Nothing Default: they’re quite happy if you never look again, review or no review.
Frequently asked questions about the price cap review
- What is the Ofgem price cap review?
- It’s a multi year programme Ofgem launched in August 2026 to look at how the energy price cap review is built, including how costs like bad debt are shared between different types of customer.
- Will my bill change because of the price cap review?
- Not immediately. The review runs into 2027 and 2028, and your bill is still set by the quarterly cap level. Ofgem confirms the October 2026 figure separately, by 26 August 2026.
- Why do direct debit customers pay less for energy?
- Suppliers treat direct debit as lower risk, so it carries a smaller share of the market’s “bad debt” costs than standard credit or prepayment does.
- Are prepayment customers paying more because of this?
- Prepayment and standard credit customers already tend to carry a bigger share of shared costs, and Ofgem’s price cap review is looking at whether that split should change.
- Where can I read Ofgem’s discussion paper?
- It’s published on Ofgem’s own website alongside the price cap review press release, and it’s open for input from the public as well as industry.
