⚡ How FreePhase Prices Work

1One national wholesale price

Every day, electricity for the next day is bought in a national day-ahead auction, with one price for each hour, for the whole of Great Britain. Someone in Cornwall, London, the North West or the Highlands starts from exactly the same wholesale price.

Regional wholesale prices ("zonal pricing") were considered and rejected by the government in July 2025. In its own words, Britain keeps a national system in which:

"all areas in Britain pay the same wholesale price for energy"

Read the government's statement to Parliament (10 July 2025)

2Each band uses the average of its hours

EDF take the average of the hourly wholesale prices in each band:

• Green 23:00–06:00 (7 hours)
• Amber 06:00–16:00 and 19:00–23:00 (14 hours)
• Red 16:00–19:00 (3 hours)

and put that average into their published formula:

Because each band is an average, one unusual hour can move the whole band. Red is only three hours long, so a single evening spike affects it most.

3Where your region comes in

The Coefficient and the Red Peak Premium are set separately for each of the 14 regions. They cover the cost of getting electricity to your door, which depends on your local network: a large rural area costs more per home to maintain than a compact city.

Same wholesale price, different prices. The last two columns show what each region would pay if the wholesale price averaged 10p per kWh (£100/MWh) in every band, with VAT at today's 0%:

Everyone paid the same for the electricity itself. The differences all come from the regional figures. Standing charges vary even more, because they carry most of the network cost: see today's FreePhase Static prices for every region.

4The Government Discount and VAT

EDF take a fixed Government Discount of 3.33p per kWh off the price, and then add VAT:

With VAT at 5%, that discount works out at 3.5p, which is the figure you'll often see quoted.

VAT on household electricity is 0% from 1 October 2026 to 31 March 2027, a temporary cut from the usual 5% that covers your unit rates and standing charge, but not gas. Unless the government extends it, VAT returns to 5% on 1 April 2027, and FreePhase prices will rise slightly then for that reason alone.

Read HMRC's guidance on the temporary zero rate

5Caps, floors and free electricity

EDF guarantee that FreePhase unit rates won't go above 75p per kWh, however high wholesale prices climb, and they never go below 0p.

When the grid has more power than it needs, typically on windy nights or sunny afternoons, wholesale prices can fall below zero, and some hours become free. FPRates works out when these are due as soon as the day-ahead auction results are published.

6Why price estimates can miss

Because each band is an average, forecasting it means predicting the unusual hours, and those are the hardest part of the market to predict. One surprise hour that's £100/MWh out moves a band by roughly:

• Amber (13 hours): about 1.6p
• Green (7 hours): about 3p
• Red (3 hours): about 7p

That's why estimates are shown as estimates, and why the published price always replaces them once the auction has cleared.

7The standing charge: what it actually pays for

The standing charge is a fixed daily amount you pay even if you use no electricity at all. Broadly, it covers three things:

• the network: the cables that carry electricity to homes and businesses
• supplier business costs, such as customer service and metering
• some government social and environmental schemes, such as the Warm Home Discount

Why it varies so much by region. Ofgem, the regulator, says each region's standing charge depends on how many people live there, how much energy is used there on average, the amount of energy suppliers need to buy, and the cost of building and improving the local network. That's why, on today's FreePhase Static prices, it ranges from 36.06p a day in London to 60.80p in Merseyside & North Wales: same electricity, very different cost of the wires.

Why it went up so much. Over the last few years, rises have been driven mostly by Ofgem's Targeted Charging Review, which moved network costs off the unit price and onto the standing charge, with the big changes landing in 2022 and 2023. The costs didn't appear from nowhere. They were moved from one part of the bill to another.

Low and zero standing charge tariffs. Ofgem has said the fixed costs behind standing charges can't be removed, only shifted onto unit rates. So a low standing charge tariff suits people who use little electricity, but costs more for higher users. EDF is currently running a Low Standing Charge Trial for FreePhase customers, worth £6.25 a month off per fuel.

Read Ofgem on why standing charges differ by region