Energy price cap methodology:

Energy price cap methodology: backwardation deadband | Ofgem

Please enable JavaScript in your web browser to get the best experience.

BETA

This site is currently in BETA. Help us improve by giving us your feedback .

Close alert:

Energy price cap methodology: backwardation deadband

Publication type:

Consultation

Publication date:

27 August 2025

Last updated:

21 November 2025

Closed date:

26 September 2025

Status:

Closed (with decision)

Topic:

Energy pricing rules

Subtopic:

Energy price cap

Show all updates

Print this page

Related links

Energy price cap

Share the page

Share on Facebook

Share on Twitter

Share on LinkedIn

Outcome of our proposal to remove the backwardation deadband in the price cap methodology for the wholesale cost allowance.

Details of outcome 

We have decided to remove the deadband from the backwardation allowance. We will allow costs currently subject to the deadband to be recovered over a rolling 12-month period. This will be implemented in cap period 16b (July to September 2026). 

We received responses from 9 energy suppliers, 1 consumer group and a consumer. Industry was broadly supportive of our proposal to remove the backwardation deadband but there were varying views on the proposed implementation date.    

Read the full outcome 

Please note that the 'Wholesale cost allowance methodology annex 2: backwardation deadband decision' document attached below is not fully accessible. If you require an alternative format, please contact priceprotectionpolicy@ofgem.gov.uk .

Energy price cap methodology: backwardation deadband decision [PDF, 237.47KB]

Wholesale cost allowance methodology annex 2: backwardation deadband decision [XLSX, 9.67MB]

Responses to the Energy price cap methodology: backwardation deadband consultation [ZIP, 3.11MB]

Original consultation 

Backwardation is when the cost to suppliers for an upcoming price cap period is higher than the cost of buying energy for a full year. Contango is the opposite.

We are reviewing whether including a deadband which sets a threshold beyond which the backwardation costs and contango benefits are passed through to consumers, remains appropriate.

In this consultation, we set out our proposal to remove the deadband, reducing uncertainty and risks across the energy market while continuing to protect consumers. We set out our main consideration for impacts on customers and suppliers as part of our rationale for proposing this change.

Who should respond

We would like views from people who have an interest in how we set the wholesale allowance in the default tariff cap. This includes:

energy suppliers

energy industry bodies

consumer groups

charities

Consultation documents

Backwardation wholesale allowance in the default tariff cap: consultation [PDF, 173.51KB]

Wholesale cost allowance methodology (Annex 2) with proposed changes on backwardation deadband [XLSX, 9.67MB]

Print this page

Related links

Energy price cap

Share the page

Share on Facebook

Share on Twitter

Share on LinkedIn

All updates

21 November 2025: added outcome of consultation.

Close

Energy price cap methodology: contracts for difference review | Ofgem

Please enable JavaScript in your web browser to get the best experience.

BETA

This site is currently in BETA. Help us improve by giving us your feedback .

Close alert:

Energy price cap methodology: contracts for difference review

Publication type:

Call for input

Publication date:

27 August 2025

Closed date:

11 October 2025

Status:

Closed

Topic:

Energy pricing rules

Subtopic:

Energy price cap

Print this page

Related links

Energy price cap

Energy price cap: programme of work for 2025 and 2026

Share the page

Share on Facebook

Share on Twitter

Share on LinkedIn

We are seeking input on whether we should consider making changes to the contract for difference allowance methodology in the default tariff cap.

Call for input description

In this call for input, we outline our views on points raised by suppliers and other organisations from our recent engagement. We are seeking clear evidence on whether we should make changes to the methodology for setting the contracts for difference allowance in the default tariff cap. We set out some questions we would like views on but welcome any wider views too.

This review is part of our wider review of the wholesale cost allowance in the default tariff cap, as outlined in our 2025 and 2026 programme of work.

Who should respond

We would like views from people who have an interest in how we set the additional wholesale allowances in the energy price cap. This includes:

energy suppliers

energy industry bodies

consumer groups

charities

How to respond

Submit your response by 10 October 2025 by emailing priceprotectionpolicy@ofgem.gov.uk .

Call for input documents

Contracts for difference allowance in the default tariff cap: call for input [PDF, 201.94KB]

Print this page

Related links

Energy price cap

Energy price cap: programme of work for 2025 and 2026

Share the page

Share on Facebook

Share on Twitter

Share on LinkedIn

Close

Energy price cap methodology: Nuclear Regulated Asset Base (RAB) | Ofgem

Please enable JavaScript in your web browser to get the best experience.

BETA

This site is currently in BETA. Help us improve by giving us your feedback .

Close alert:

Energy price cap methodology: Nuclear Regulated Asset Base (RAB)

Publication type:

Consultation

Publication date:

27 August 2025

Last updated:

21 November 2025

Closed date:

27 September 2025

Status:

Closed (with decision)

Topic:

Energy pricing rules

Subtopic:

Energy price cap

Show all updates

Print this page

Related links

Energy price cap

Share the page

Share on Facebook

Share on Twitter

Share on LinkedIn

Outcome of our consultation on amending the price cap methodology to account for the Nuclear Regulated Asset Base (RAB) allowance.

Details of outcome

We have decided to include an allowance for costs associated with the Nuclear RAB in the default tariff cap from 1 January 2026.

Our decision document considers responses received to the consultation and sets out the methodology for calculating the allowance. 

The decision will ensure that default customers pay no more than the efficient costs incurred by suppliers in funding the Nuclear RAB scheme.

Read the full outcome

Note: the document attached below, Annex 4 - policy cost allowance methodology v1.22, is not fully accessible. If you require an alternative format, please contact  retailpriceregulation@ofgem.gov.uk . 

Amending the price cap methodology to account for the Nuclear Regulated Asset Base (nRAB) allowance.pdf [PDF, 177.20KB]

Annex 4 - policy cost allowance methodology v1.22 [XLSX, 494.25KB]

nRAB non-confidential responses [ZIP, 1.28MB]

Original consultation

Consultation description

We are consulting on our proposed methodology to account for the costs associated with the Nuclear RAB into the default tariff cap. The Nuclear RAB is a finance model that was introduced to fund new nuclear power projects under the Nuclear Energy (Financing) Act 2022.

We intend for the outcome of this consultation to be in place from January 2026 onwards.

Who should respond

We would like views from people with an interest in the default tariff cap levels and future electricity generation in the price cap. We particularly welcome responses from:

energy suppliers

other interested industry parties

consumer groups

charities

the public

Consultation documents

Amending the price cap methodology to account for the Nuclear Regulated Asset Base (RAB) allowance: consultation [PDF, 265.51KB]

Annex 4: policy cost allowance methodology (Nuclear RAB) [XLSX, 488.87KB]

Print this page

Related links

Energy price cap

Share the page

Share on Facebook

Share on Twitter

Share on LinkedIn

All updates

21 November 2025 outcome of consultation added

Close

Energy price cap methodology: group correction factors | Ofgem

Please enable JavaScript in your web browser to get the best experience.

BETA

This site is currently in BETA. Help us improve by giving us your feedback .

Close alert:

Energy price cap methodology: group correction factors

Publication type:

Consultation

Publication date:

27 August 2025

Last updated:

21 November 2025

Closed date:

27 September 2025

Status:

Closed (with decision)

Topic:

Energy pricing rules

Subtopic:

Energy price cap

Show all updates

Print this page

Related links

Energy price cap

Share the page

Share on Facebook

Share on Twitter

Share on LinkedIn

Our decision to include the adjustment for the Group Correction Factors (GCFs) in the default tariff cap.

Details of outcome

We have decided to include an allowance for the GCFs in the default tariff cap from 1 January 2026. The decision document attached below sets out the rationale behind our chosen approach following the feedback we have received during the consultation. It also sets out the next steps for implementation and outlines our approach towards enduring updates.

Read the full outcome

Energy price cap methodology group correction factors decision [PDF, 157.03KB]

Energy price cap methodology group correction factors responses [ZIP, 685.32KB]

Original consultation

We are considering how best to ensure the treatment of electrical losses in the price cap continues to accurately reflect the relevant parameters used in settlement. This is because group correction factors have increased since the cap was introduced.

Group correction factors are used to correct residual discrepancies between energy entering the distribution system and energy allocated to suppliers. As a result of the increase, our existing assumptions no longer reflect actual system losses.

We are reviewing the assumptions behind these electrical loss factors and proposing a change to include an adjustment for group correction factors, so we can better account for this issue.

Who should respond

We would like views from people with an interest in the settlement process, including suppliers, and industry bodies.

Consultation documents

Energy price cap methodology: group correction factors consultation [PDF, 293.05KB]

Supplementary model demand and losses: draft for consultation [ZIP, 58.43MB]

Print this page

Related links

Energy price cap

Share the page

Share on Facebook

Share on Twitter

Share on LinkedIn

All updates

21 November 2025 added outcome of consultation.

Close