The average gas and electricity bill in the UK is to increase to a maximum of £1,971 - an increase of £693 a year, Ofgem has announced.
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.
“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.”
The announcement impacts around 22 million households and the rises will come into force from April 1, when the price cap on energy bills is updated for the next six months. We have a comprehensive list of effective ways to cut your energy bills at home here.
The energy regulator on Wednesday said that it was moving the price cap announcement forward.
It was originally meant to be revealed on Monday but officials, without saying why, decided to move it to 11am on Thursday.
Cornwall Insight experts said they expect the cap to rise even further – to £2,329 – for six months from October.
However, this prediction is likely to change if Ofgem makes changes to how it calculates the price cap, which it is expected to do.
The rises have been caused by a manifold increase in global gas prices.
Calls have been mounting for the Government to step in to protect households, especially the most vulnerable.
On Wednesday, the Times reported that ministers are planning to back loans of around £6 billion to energy companies.
The companies would then pass on this money to households, saving them around £200 off their energy bills each, in a rebate.
This would come alongside more targeted help, such as an expansion of the Warm Home Discount Scheme.
The £6 billion figure, suggested to the Times by sources, is considerably lower than earlier estimates on how much it might cost to help out households through loans.
One figure that had been floated was as high as £20 billion.
Ministers have reportedly approved the plans.
The new money will be a loan to energy companies and they will be expected to pay it back.
That means while customers are protected from the worst of April’s price rises, they will likely pay the same amount to their energy supplier in the long run.
This plan is predicated on a fall in the record-high price that energy suppliers are currently paying for gas and electricity.
If this price does not significantly drop, bills will need to rise further to recoup the loan money down the line.
Some experts predict that high energy prices are probably here to stay for a couple of years.
If prices fall, the scheme would likely mean these drops in wholesale costs will not be passed on to customers until the Government-backed loans have been repaid.
Ministers are reportedly also expected to announce extra help for poorer households, including an extension of the Warm Home Discount Scheme.
Energy price rises are expected to come alongside an overall spike in the cost of living across the UK.
Inflation reached 5.4% in the year to December, recent figures from the Office for National Statistics showed.
It was likely to spark a crisis in the cost of living for households across the UK even without a 50% spike in energy bills.
Emma Pinchbeck, the boss of trade body Energy UK, said: “Several ideas to reduce bills have been under discussion but it’s now a matter of urgency that customers get reassurance from the Government that they won’t be left to face this rise alone.
“Suppliers have been providing hundreds of millions of pounds in financial assistance since the start of the pandemic and will continue to do all they can to help customers struggling with their bills.
“When international gas prices are this high, there is a need for the Government to act, as other Governments already have, to make a real difference to bills and to protect the wider economy.”
