UK energy price cap: adjustment allowance
UK energy price cap: adjustment allowance stood at £0 per year in Q4 2026, according to Ofgem — energy price cap model. It is one of the indicators in the Gas and electricity prices table (Value · Quarterly), with a complete series running from Q4 2020 to Q4 2026. The complete series with an interactive chart, free to download.
This indicator in the Gas and electricity prices table
| Indicator | Q4-2026 | Q3-2026 | Q2-2026 | Q1-2026 | Q4-2025 | Q3-2025 | Q2-2025 | Q1-2025 | Q4-2024 | Q3-2024 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Cost components: total (excluding VAT) | 1,674.11 | 1,575.07 | 1,553.77 | 1,664.54 | 1,791.5 | 1,757.5 | 1,890.98 | 1,773.37 | 1,751.67 | 1,595.09 | |
| Adjustment allowance | 0 | 0 | 0 | 0 | 0 | 0 | 30.57 | 30.57 | 30.57 | 30.57 | |
| Supplier profit margin (EBIT) | 45.72 | 42.61 | 42.33 | 43.6 | 45.33 | 46.3 | 48.2 | 46.2 | 45.89 | 41.4 |
Understanding UK energy price cap: adjustment allowance
Expressed as an annualised monetary figure, this series measures the adjustment allowance incorporated into the domestic energy price cap across the United Kingdom, before value added tax. It isolates reconciliation amounts—designed to correct past under- or over-estimation of various cost stack components—from current wholesale, network, and operational allowances. This figure acts as a balancing mechanism ensuring that neither suppliers nor consumers are permanently penalised by forecasting errors in previous periods.
Analysts reviewing this metric must understand that it reflects historical estimation variances rather than current market conditions. Period-on-period movements can be volatile as past forecasting errors are trued up, making year-on-year comparisons less informative for underlying cost trends. Users should avoid treating this allowance as a permanent structural cost category.
Frequently asked questions
- Why is an adjustment allowance necessary in the price cap methodology?
- Because future costs like wholesale energy must be estimated in advance, reconciliation allowances correct for differences between forecasts and reality.
- Can this adjustment figure be a negative value?
- Yes, if previous cost allowances were overestimated, the adjustment acts to return funds by lowering the cap.
- Does this allowance cover all elements of the cost stack equally?
- It specifically targets components where historical forecasting variances require correction, notably wholesale energy estimations.