Who is Ofgem?
Ofgem is the energy regulator in Great Britain. It stands for the Office of Gas and Electricity Markets. Before November 2000, the energy market was regulated by two separate bodies: the Office of Electricity Regulation (OFFER) and the Office of Gas Supply (Ofgas). These were merged under the Utilities Act 2000 to create a single regulator responsible for both gas and electricity.
What was the purpose of the merger?
The government wanted a single regulator to oversee the energy market. This would help ensure a secure energy supply, promote fair competition, and most importantly protect consumers. Ofgem is an independent regulator, but it still operates within the laws and regulations passed by Parliament.
What does Ofgem do?
Ofgem’s main role is to protect the interests of energy consumers in Great Britain.
Ofgem works alongside energy companies, the government, and NESO to help create a fair and secure energy system. This is important because they set the regulations for the entire electricity and gas market.
Any organisation wishing to operate in the energy market, whether in generation, transmission, distribution, or supply, must hold a license from Ofgem. This license outlines the rules companies must follow to ensure the market remains efficient, safe, and reliable. Ofgem writes these rules, monitors how companies operate, and takes action when they fail to comply. This also includes regulating how much companies are allowed to charge for energy.
Who Funds Ofgem?
Ofgem is funded in three main ways. Firstly, through the annual licensing fees paid by energy companies. They also receive government funding to run specific projects. Finally, the administration costs of environmental and social schemes are funded by the Department for Energy Security and Net Zero (DESNZ).
How does Ofgem help businesses?
Ofgem helps businesses by regulating the energy market to ensure it is fair and competitive. A competitive market means suppliers are encouraged to offer better prices, improved services and new innovations in order to win customers, which ultimately protects consumers’ interests.
What are the benefits of competition for consumers?
How Ofgem helps make this happen
What is the energy price cap?
The energy price cap limits the maximum amount that suppliers can charge for each unit of gas or electricity you use. Ofgem introduced the price cap back in 2019 because there were concerns that customers were paying a ‘loyalty penalty’. This meant that customers who did not regularly switch suppliers were often charged more, as some companies gradually increased prices for long-standing customers. The cap sets a limit on the unit rates suppliers can charge, protecting consumers from this loyalty penalty.
Ofgem reviews the price cap every three months.
| Current price cap (October to December 2025) |
Upcoming price cap (January to March 2026) |
|
|---|---|---|
| Electricity daily standing charge | 53.68p | 54.75p |
| Electricity (unit cost per kWh) | 26.35p | 27.69p |
| Gas daily standing charge | 34.03p | 35.09p |
| Gas (unit cost per kWh) | 6.29p | 5.93p |
Why are the rates for electricity so much higher than gas?
An increasing amount of our electricity comes from renewable sources like solar and wind. But the UK still relies on gas to meet demand when renewables aren't generating enough energy.
Electricity demand tends to be high when the sun sets and renewable sources are less likely to be generating enough. This means we have to turn to gas to meet this demand, which is more expensive and drives up our bills. Find out more about
gas prices here.
An important thing to note is that the price caps do not apply to businesses, just domestic customers.
If you are looking for a specific topic, please visit Ofgem’s website for more detailed information on rules and regulations.
How can Purely help?
Ofgem allows businesses to choose from many different energy suppliers. We can help you compare these options, explain the prices, and make sure you get the best deal for your business.
Have you got any other business-related questions? Take a look at our guides, or get in touch to discuss your business gas or electricity.
Written by Faith Labong at Purely Energy.
