Does the OFGEM price cap apply to business?

Did you know that in early 2025, UK households paying for energy on standard tariffs never saw bills above 28 pence per kWh thanks to Ofgem’s price cap, while businesses with the same usage faced no such limit? 

If you run a shop, an office or a factory, you’re fully exposed to every twist in the wholesale market—no cap to shield you from rising costs. Let’s break down exactly what the Ofgem price cap covers, why businesses sit outside it, and what that means for your energy bill.

What Is the OFGEM Price Cap?

Definition and Purpose

The Domestic Gas and Electricity (Tariff Cap) Act 2018 gives Ofgem the power to limit how much suppliers charge household customers on standard variable and prepayment tariffs. Ofgem, the UK’s energy regulator, set the cap to protect families from sudden spikes in wholesale prices. It ensures homes pay a fair rate per unit and daily standing charge without hunting for the cheapest deal.

How It Works

• Unit and Standing Charge Caps: Ofgem caps the pence-per-kWh rate and the daily standing charge for standard domestic tariffs.
• Quarterly Reviews: Every three months, Ofgem updates the cap to reflect wholesale costs, network fees, policy costs and other factors.
• Typical Domestic Consumption Values (TDCVS): The cap is based on average use. If your household uses more or less energy, your rate stays capped, but your total bill shifts.

Does the Price Cap Apply to Businesses?

Domestic vs. Commercial Energy Contracts

Simply put: the price cap covers only homes in England, Scotland and Wales. Businesses sit in a separate market. Household meters get capped rates; business meters get market rates.

Why Businesses Are Excluded

• Bespoke Deals: Companies negotiate based on size, location, contract length and risk appetite.
• Varied Use: A corner shop’s energy needs differ wildly from a 24/7 data centre. A single cap can’t suit every profile.
• Risk Pricing: Suppliers add margins for wholesale swings—anything from a cold snap in Europe to a power station fault.

Impact on Businesses

Rising Energy Costs for Businesses

Without a cap, businesses face uncapped rates that have often topped 70 pence per kWh during crunch periods. Global gas shortages and events like the Russia-Ukraine conflict have driven wholesale costs sky-high, and your bills follow every jump.

Lack of Protection

With no regulatory shield, firms can see sudden bill hikes. Cafés and small retailers report quarterly energy quotes that jump by hundreds of pounds overnight. Even medium-sized offices feel the pinch when fixed-rate deals come up for renewal.

Government Support (and Its End)

• Energy Bill Relief Scheme (EBRS): Offered big discounts in 2022–23.
• Energy Bills Discount Scheme (EBDS): Followed EBRS with smaller top-ups through March 2024.
• March 2024 Cut-Off: Both schemes ended at Q1 2024, and no fresh support has emerged.

Today, every firm is back to square one—fully exposed to market forces.

Alternatives for Businesses to Manage Energy Costs

Negotiating Fixed-Rate Contracts

Lock in a rate for 12–36 months to avoid steep spikes. Compare suppliers and use a solid business electricity comparison service to spot hidden fees.

Energy Efficiency Measures

• LED Lighting & Smart Controls: Slash lighting costs by up to 80%.
• Insulation & Building Upgrades: Reduce heating and cooling demand. Long-term savings often outweigh upfront costs.

Renewable Energy Options

• On-Site Solar or Wind: Generate part of your own power.
• Green Tariffs: Some suppliers let you lock into 100% renewable energy, sometimes at a small premium, but with brand value.

Indirect effects of the domestic cap

Even though your contract isn’t capped, what happens in homes still matters:

• Signal for wholesale trends: If Ofgem raises the household cap because global gas prices spike, business rates usually track that move.
• Home-office crossover: If you run a business from home, your personal bill still benefits from the cap—just don’t expect the same cover for your business meters.

Future Outlook for Business Energy Regulation

The UK government’s Review of Electricity Market Arrangements (REMA) is due mid-2025. Possible reforms include zonal pricing (rates by region) or new schemes to help small firms. 

While no business cap is on the table yet, future rules may aim to balance domestic protections with commercial needs. Keep an eye on REMA—any shift in policy could change your next contract.

Conclusion

The Ofgem price cap offers a vital safety net—but only for homes. Businesses must fend for themselves in a volatile market. By comparing deals, locking in fixed rates, boosting efficiency and considering renewables, you can take charge of your energy spend. Watch policy reviews closely and act fast at renewal time to keep costs under control.

Looking for expert help to navigate your next energy deal? At Utility4Business, we specialise in business electricity comparison and broker bespoke contracts that suit your cash flow and risk needs. Visit Utility4Business today to lock in the best fixed-rate deal and start saving on your energy bills.