Even though energy suppliers are free to set their individual tariffs, they are largely influenced by Ofgem, the regulator for gas and electricity markets. Ofgem sets a maximum billable level for all the components of the energy price described above.
The system is in place to maintain fair prices for customers and to create the conditions needed for a transition to a greener energy system (through supporting renewable electricity).
The price limits on the individual components collectively make up the energy price cap. Ofgem updates the energy price cap every three months. Even though the price cap is an upper limit on prices, it has de facto become the price most consumers pay.
