You may have seen the latest energy price cap described as £1,723 a year.

From 1 October 2026, Ofgem's energy price cap rises by 4%, from £1,663 to £1,723 for a typical household paying by Direct Debit and using both gas and electricity.

But there's an important detail behind that headline:

£1,723 isn't a limit on your annual energy bill.

And it doesn't necessarily mean a typical household will actually pay £1,723 over the next 12 months.

Understanding why can make it much easier to judge whether an energy tariff really represents good value.

So what does the £1,723 price cap actually mean?

The energy price cap limits the rates suppliers can charge customers on default tariffs. It covers the price per unit of gas and electricity and the daily standing charge.

How much you actually pay still depends on how much energy you use, as well as factors including where you live, how you pay and the type of meter you have.

The £1,723 figure is therefore best thought of as a benchmark for a typical household, rather than a maximum bill.

Ofgem makes an important qualification when describing the figure. It says £1,723 is what an average dual-fuel household would pay if the October price-cap level were sustained for a year.

That's an important distinction.

The October price cap doesn't actually last a year

The £1,723 price-cap level applies from:

1 October to 31 December 2026.

Ofgem reviews and updates the price cap every three months. The next cap, covering January to March 2027, is due to be announced by 25 November 2026.

So when you see the October cap expressed as £1,723 a year, three months of rates are effectively being annualised to provide a standard benchmark.

That's useful for comparison.

But it isn't the same thing as predicting what you'll actually spend over the coming year.

What are the actual October rates?

For a standard variable tariff paid by Direct Debit, Ofgem's national average rates from 1 October are:

These are averages across England, Scotland and Wales. Your actual capped rates can differ depending on where you live.

There's another unusual feature of this particular cap period.

The Government has removed VAT from domestic electricity from 1 October 2026 to 31 March 2027. Gas continues to carry 5% VAT. Ofgem has already incorporated this change into its published October figures.

A 4% price-cap increase doesn't mean everyone's bill rises 4%

This is where headline figures need some context.

The national average electricity unit rate moves from 26.11p/kWh to 26.32p/kWh, while the average electricity standing charge actually falls from 57.19p to 54.83p per day.

Gas moves more noticeably, from 7.33p/kWh to 7.97p/kWh, while its average standing charge rises from 29.04p to 29.68p per day.

Consider two homes.

One has gas central heating and uses relatively little electricity.

Another is all-electric.

They're both reading the same headline:

“Energy price cap rises 4%.”

But that doesn't mean their individual bills will each increase by exactly 4%.

Their actual costs depend on what energy they use and how much of it they consume.

Your energy use isn't evenly spread throughout the year

There's another complication when comparing annual figures.

Most households don't consume exactly one-twelfth of their annual energy every month.

For a home with gas central heating, for example, consumption can be much higher during colder periods when the heating is being used.

That matters when you're trying to decide whether to stay on a variable tariff or move to a fixed tariff.

Simply comparing two annualised figures can tell you something useful about relative prices.

But it doesn't necessarily tell you exactly how many pounds you will spend — or save — over a particular period.

What about claims such as “save £X by fixing”?

This is where it's worth looking carefully at what a quoted saving is actually comparing.

Imagine a fixed tariff has an estimated annual cost of:

£1,550

and it is compared with October's annualised price-cap figure of:

£1,723

The difference is:

£173.

Mathematically, that's perfectly straightforward.

But there's another question worth asking:

Does that mean you'll actually be £173 better off over the next 12 months if you switch?

Not necessarily.

The £1,723 figure annualises rates that currently apply for only three months. The price cap for January to March 2027 hasn't yet been announced. And your own energy consumption may differ substantially from the typical household used for the comparison.

That doesn't make an annualised saving figure useless.

It means you need to understand what is being compared — and what the saving actually represents.

Headline saving and actual saving aren't always the same thing

There are really three different numbers consumers can encounter:

1. An annualised price-cap figure

A standard benchmark showing what a typical household would pay if the current cap rates lasted for a year.

2. A headline tariff saving

This may be calculated by comparing the annualised cost of one tariff with another annualised benchmark.

3. Your actual energy cost

What your household really pays depends on your tariff, unit rates, standing charges and the amount of energy you actually consume.

Those three numbers can all be valid while still being different.

That's why it's worth looking beyond the headline.

So should you stay or switch?

There isn't one answer that's right for everyone.

A fixed tariff may offer lower rates and can provide more certainty over what you'll pay per unit during the fixed period.

But fixing isn't automatically the right decision.

When comparing your options, consider:

• the unit rates and standing charges you're being offered;

• how much gas and electricity your household actually uses;

• what you're currently paying;

• the length of any fixed tariff;

• any exit fees;

• and how much you value certainty if energy prices change.

And importantly, staying with your current supplier shouldn't automatically be treated as the wrong outcome.

Sometimes switching may offer better value.

Sometimes staying may.

The comparison should determine the answer — rather than starting with the assumption that you need to switch.

Look beyond the headline

The £1,723 October price cap is a useful benchmark for understanding what's happening to energy prices.

But it isn't your personal energy budget.

And a saving calculated against that figure isn't necessarily the same thing as the amount you'll actually save over the next 12 months.

A better starting point is to understand your consumption, your current tariff or renewal offer, and the alternatives available to you.

Because ultimately, the useful question isn't simply:

“How much could I save by switching?”

A better question is:

“Would I actually be better off staying or switching?”

About Likewise Compare

We're building Likewise Compare to help households understand their energy renewal options more clearly. Our comparison service isn't live yet. You can join the waitlist to hear when the first renewal checks become available.

Sources

Ofgem — Energy price cap unit rates and standing charges

Ofgem — Changes to the energy price cap, 1 October to 31 December 2026

Ofgem — Energy price cap explained