Energy bills could rise by nearly £100 for 15 million households as customers are set to pay the price for coronavirus debts.
Ofgem, the regulator, said that its price cap for default tariffs will rise by £96 to £1,138 from April 1, while the cap for pre-payment meters will increase by £87.
Charities said the increase will be a blow for households at a time when bills are already squeezed by coronavirus and Government support measures are coming to a close.
The increase announced today includes a £23 allowance for the suppliers to recoup the cost of “bad debt” incurred by customers during the pandemic.
Roughly 11 million households are on a default tariff, meaning they have never switched or their deal has expired, while four million have prepayment meters.
The increase does not guarantee price increases but traditionally many large suppliers have set tariffs at or near the level of the cap.
Jonathan Brearley, chief executive of Ofgem, said: “Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic. We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.
“The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal.”
The bulk of the hike comes from the higher costs to energy firms of buying the underlying energy to power homes and businesses, known as the wholesale price.
This plummeted at the start of the pandemic as demand for energy slumped, but the return of office workers around the world has led to the price creeping up in recent months.
The new price cap also allows for a £23 increase, included in the £96, to cover the cost of consumers who will not be able to repay the debts they have built up because of the pandemic.