Big energy suppliers are expected to increase their prices by £117 for 11m customers on default tariffs to a new ceiling of £1,254 a year for a home with typical use, leaving many consumers paying more for their electricity and gas than before the flagship policy took effect on 1 January.
Consumer groups said the rise was “eye-watering” and would be a shock for people who thought the cap would stop their bills from rising.
The rise is one of the worst in years and on a par with the largest by the big six energy suppliers over the past two years, many of which the government claimed were unjustified.
Comparison sites, which are opposed to the cap, branded the increase “brutal”, “jaw-dropping” and the “worst possible start for the energy cap”.
Ofgem also announced a rise of £106 a year to £1,242 for a further 4m households on prepayment meters, who are typically more vulnerable customers.
Ofgem insisted consumers were paying a fair price for their energy despite the increases. The regulator said it had to raise the caps because wholesale costs facing energy firms had increased by 17% and other costs had climbed, too.
The government said the higher caps reflected sharp increases in electricity and gas costs.
One of the big six companies, n-power, last week blamed 900 job cuts on the cap and competition.