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Written by: EnergySwitch editorial team · Last reviewed: 23 October 2026
Direct answer: Of the £1,723 typical dual-fuel price cap (Direct Debit, 1 October to 31 December 2026), Ofgem’s figures put wholesale energy at about £812 (47%), networks at £417 (24%), operating, debt and industry costs at £291 (17%), policy costs at £96 (6%), the supplier earnings allowance at £46 (2.7%), headroom £18, a levelisation allowance of £8, and VAT of £41, all on gas. Pound amounts come from Ofgem’s Annex 9 model; percentage shares come from Ofgem’s summary letter.
The figures assume Ofgem’s typical use of 2,500 kWh electricity and 9,500 kWh gas a year (why that matters: £1,723 vs £1,935 explained). Your bill will be different because your usage, region and payment method are different.
The £1,723 cap, line by line
| Cost | £ a year | Share (our calc) | Ofgem’s published share | What it pays for |
|---|---|---|---|---|
| Wholesale energy (incl. capacity market) | £812.43 | 47.1% | 47% | Buying the gas and electricity, plus the capacity market charge for keeping power supplies secure. Ofgem’s summary labels this group “wholesale incl. contracts for difference”. |
| Network costs | £417.34 | 24.2% | 24% | Building, maintaining and running the gas pipes and electricity wires, including transmission and local distribution networks. |
| Operating costs | £203.94 | 11.8% | 17% (operating, debt and industry combined) | Suppliers’ day-to-day costs such as billing, customer service and metering. |
| Debt-related costs | £51.79 | 3.0% | An allowance for the cost of customers’ unpaid bills. | |
| Industry charges | £35.29 | 2.0% | Charges suppliers pay to industry bodies and systems. | |
| Smart meter net cost change | −£6.93 | −0.4% | not shown | An adjustment for the net cost of the smart meter rollout. Currently negative, so it slightly reduces the cap. Ofgem’s summary letter doesn’t show it as a separate line. |
| Policy costs | £96.39 | 5.6% | 6% | Government social and environmental schemes, such as the Warm Home Discount. |
| Supplier earnings (EBIT) | £45.72 | 2.7% | 2.7% | An allowed margin: earnings before interest and tax. |
| Headroom | £18.13 | 1.1% | 1% | An allowance for uncertain costs and risks. |
| Levelisation allowance | £8.05 | 0.5% | 0.5% | Makes standing charges the same for prepayment and Direct Debit customers. For Direct Debit it is a small addition; for prepayment it is negative. |
| VAT (5% on gas only; 0% on electricity) | £41.20 | 2.4% | not shown as a share | VAT on gas. Electricity has no VAT from 1 October 2026 to 31 March 2027. |
| Total | £1,723.36 | 100% | £1,723 |
Our “share” column divides each Annex 9 amount by the £1,723.36 total; it matches Ofgem’s rounded shares. Operating costs (£203.94), debt-related costs (£51.79) and industry charges (£35.29) add up to £291.03, the 17% Ofgem reports as “operating, debt and industry costs”. Figures may not sum exactly because of rounding.
What changed since July–September
The typical Direct Debit cap rose from £1,663 to £1,723 (+£60, 4%). Ofgem says the wholesale allowance rose 11%, with gas up 13% and electricity up 10%, mainly because of conflict and geopolitical instability in the Middle East. VAT fell because electricity VAT went from 5% to 0% on 1 October; Ofgem says that without this the October figure would have been around £45 higher.
| Cost | Jul–Sep 2026 | Oct–Dec 2026 | Change (£) |
|---|---|---|---|
| Wholesale energy (incl. capacity market) | £728.69 | £812.43 | +83.74 |
| Network costs | £415.92 | £417.34 | +1.42 |
| Operating costs | £200.51 | £203.94 | +3.44 |
| Debt-related costs | £49.31 | £51.79 | +2.48 |
| Industry charges | £34.02 | £35.29 | +1.27 |
| Smart meter net cost change | −£8.99 | −£6.93 | +2.06 |
| Policy costs | £96.28 | £96.39 | +0.11 |
| Supplier earnings (EBIT) | £42.61 | £45.72 | +3.11 |
| Headroom | £16.73 | £18.13 | +1.41 |
| Levelisation allowance | £9.09 | £8.05 | -1.04 |
| VAT | £79.21 | £41.20 | -38.01 |
| Total | £1,663.37 | £1,723.36 | +59.99 |
Electricity vs gas
The £1,723 is two separate caps added together: electricity (£858.20) and gas (£865.16). Wholesale is about 44% of the typical electricity figure and 50% of the gas figure (our arithmetic from Annex 9).
| Cost | Electricity (2,500 kWh, single rate) | Gas (9,500 kWh) |
|---|---|---|
| Wholesale energy (incl. capacity market) | £379.17 | £433.25 |
| Network costs | £228.59 | £188.74 |
| Operating costs | £98.38 | £105.56 |
| Debt-related costs | £26.68 | £25.11 |
| Industry charges | £19.24 | £16.05 |
| Smart meter net cost change | −£1.44 | −£5.49 |
| Policy costs | £71.94 | £24.46 |
| Supplier earnings (EBIT) | £23.11 | £22.61 |
| Headroom | £9.03 | £9.10 |
| Levelisation allowance | £3.48 | £4.56 |
| VAT | £0.00 | £41.20 |
| Total | £858.20 | £865.16 |
How the mix differs by payment method
| Cost | Direct Debit | Standard credit | Prepayment |
|---|---|---|---|
| Wholesale incl. contracts for difference | 47% | 44% | 48% |
| Networks | 24% | 22% | 25% |
| Operating, debt and industry costs | 17% | 23% | 18% |
| Policy | 6% | 5% | 6% |
| EBIT allowance | 2.7% | 2.6% | 2.7% |
| Headroom | 1% | 1% | 1% |
| Levelisation allowance | 0.5% | 0% | −3% |
| Typical annual total | £1,723 | £1,861 | £1,678 |
Standard credit has a bigger operating, debt and industry share, mostly because its debt-related allowance is higher. Prepayment has a negative levelisation allowance, which keeps prepayment standing charges in line with Direct Debit.
What you can and can’t influence
- Usage: wholesale, network and most other costs are recovered partly through unit rates, so using less cuts your bill. See our energy saving advice guide.
- Payment method: Direct Debit and prepayment are cheaper than standard credit in every region.
- Tariff: fixed deals are priced differently from the cap. Compare with the fix vs price cap calculator.
- Standing charges: you pay these whatever you use. See standing charges October 2026.
- Your own bill: to find your unit rates, standing charges and kWh on a real bill, see how to read your energy bill.
Use this data
You are welcome to quote or chart these figures. Please cite: EnergySwitch, What makes up an energy bill: the October–December 2026 price cap broken down, from Ofgem Annex 9 v1.11 and the Ofgem summary letter (26 August 2026), energyswitch.co.uk/guides/energy-bill-breakdown-price-cap/, accessed [date].
Contains public sector information licensed under the Open Government Licence v3.0 (source: Ofgem).
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Related: energy price cap hub · price cap rates by region · how to switch energy supplier
FAQ
What is the biggest part of an energy bill?
Wholesale energy. For October to December 2026 it is £812 of the £1,723 typical dual-fuel cap, or 47%. Network costs are next at 24%.
How much of my bill goes to network costs?
About £417 a year, or 24%, of the typical Direct Debit dual-fuel cap for October to December 2026.
How much profit do energy suppliers make under the price cap?
The cap includes an earnings before interest and tax (EBIT) allowance of £45.72 a year for a typical dual-fuel Direct Debit customer in October to December 2026, which Ofgem puts at 2.7% of the cap. This is an allowance, not a measure of any supplier’s actual profit.
How much VAT is in the £1,723?
About £41.20, all on gas. VAT on domestic electricity is 0% from 1 October 2026 to 31 March 2027; gas stays at 5%.
What are policy costs?
Costs of government social and environmental schemes, such as the Warm Home Discount. They are £96 a year in the typical Direct Debit dual-fuel cap, about 6%.
Why did the cap rise in October 2026?
Ofgem says mainly because of higher wholesale costs. The wholesale allowance rose by 11% (gas up 13%, electricity up 10%), driven by conflict and instability in the Middle East. The removal of VAT on electricity partly offset this.
Is the breakdown the same for prepayment and standard credit?
Similar, but not the same. Ofgem’s shares for standard credit are 44% wholesale and 23% operating, debt and industry costs. For prepayment they are 48% wholesale and a levelisation allowance of minus 3%.
Sources
- Ofgem, Summary of changes to energy price cap, 1 October to 31 December 2026 (PDF), Annexes 1–3 (26 August 2026; checked 23 October 2026)
- Ofgem, Annex 9: levelisation allowance methodology and levelised cap levels v1.11 (XLSX), sheet 1b (26 August 2026; checked 23 October 2026)
- Ofgem, Energy price cap (default tariff) levels (checked 23 October 2026)
- Ofgem, Energy price cap and standing charges explained (checked 23 October 2026)
- Ofgem, Energy price cap will rise by 4% from October 2026 (press release) (26 August 2026; checked 23 October 2026)
Pound amounts are Ofgem’s Annex 9 values; shares marked “our calc” and the electricity/gas wholesale percentages are our arithmetic. This page is general information, not financial advice. EnergySwitch is not Ofgem Confidence Code accredited.
