The energy price cap will rise by 54 per cent from April this year, Ofgem has announced.
The rise will see average annual bills rise by around £693 to as much as £1,971 for standard tariff customers and £2,017 for prepayment meter customers.
The energy regulator sets a new price cap - the maximum amount suppliers are allowed to charge their customers - every six months, and it affects around 22 million homes across England, Wales and Scotland.
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Soaring wholesale gas prices have seen energy companies struggle to stay afloat under the current price cap, with many smaller suppliers going under in recent months.
The rise, which follows an 12 per cent rise last October, will come into force from April 1, when the price cap on energy bills is updated for the next six months.
Ofgem chief executive Jonathan Brearley said: “We know this rise will be extremely worrying for many people, especially those who are struggling to make ends meet, and Ofgem will ensure energy companies support their customers in any way they can.
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“The energy market has faced a huge challenge due to the unprecedented increase in global gas prices – a once in a 30-year event – and Ofgem’s role as energy regulator is to ensure that, under the price cap, energy companies can only charge a fair price based on the true cost of supplying electricity and gas.
“Ofgem is working to stabilise the market and over the longer term to diversify our sources of energy which will help protect customers from similar price shocks in the future.”
What support will be available to households?
Chancellor Rishi Sunak is expected to outline new financial measures to support households struggling with rising energy bills.
According to the Times, Mr Sunak will commit to giving households in council tax bands A to C rebates funded by Government grants under targeted measures for poorer households.
The Treasury did not rule out the move nor did it deny that the Chancellor could announce state-backed loans to give all homes a discount on their energy bills of £200.
Asked about the new support package, a Government spokeswoman said: “We recognise people are facing pressures with the cost of living, which is why we are providing support worth around £12 billion this financial year and next.
“We will provide an update in due course on further help for households across the UK to meet their energy costs in the face of rising global gas prices.”
What else is contributing to the cost of living crisis?
The Resolution Foundation recently said each household can expect outgoings to increase by £1,200 this year.
The Bank of England is widely expected to raise interest rates from 0.25% to 0.5% with its forecasts likely to show rampant inflation this spring.
Along with rising energy bills, there is also a one-year 1.25 per cent National Insurance rate rise due in April to help pay for social care and NHS funding.
The latest inflation figures have shown that food retailers are also starting to pass on higher costs to consumers, with inflation firmly hitting the supermarket shelves.
In addition, ministers announced last year that rail fares will increase by 3.8% in March.
