Video report by ITV News Consumer Editor Chris Choi
Around 15 million households will see their energy prices rise after regulator Ofgem hiked price caps designed to protect those on poor value deals.
The new prices come just months after another tariff cap was announced.
The original cap, which was announced in November but can into effect on January 1, supposedly fixed prices at £1,137 a year.
But that will now be scrapped.
Hikes in wholesale costs mean that prices will rise £117 from the originally set figure to £1,254 a year from April 1, the energy watchdog said.
Ofgem said the price cap for pre-payment meter customers will also increase – by £106 to £1,242 a year from the start of April.
It insisted those affected will still pay a “fair price” for their energy as the increase reflects a genuine increase in underlying wholesale costs, rather than provider profiteering.
It said even after the April increase, those on default deals – including standard variable tariffs (SVTs) – will still be saving around £75 to £100 a year on average thanks to the price cap, which was introduced in January.
Dermot Nolan, chief executive of Ofgem, said: “Under the caps, households on default tariffs are protected and will always pay a fair price for their energy, even though the levels will increase from April 1.
“We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering.”
Amount out of the £117 increase which is down to higher wholesale energy costs
Ofgem will review the level of the cap again in August for the six-month winter price cap period, which comes into force on October 1.
The regulator said around £74 of the £117 increase in the default price cap was down to higher wholesale energy costs, which make up over a third – or £521 – of the overall cap.
Wholesale costs have risen by 17% since the cap was set, said Ofgem,
It said other costs, including network costs for transporting electricity and gas to homes and those associated with government environmental and social schemes, have also risen and contributed to the increase in the caps.
Ofgem added that customers on default deals could save more money by switching to a better deal.
The much-talked-about, much-vaunted, but ill-thought-through price cap will now feel like a damp squib to most people
But some consumer groups baulked at the level of the hike.
Martin Lewis, founder of MoneySavingExpert.com and its Cheap Energy Club, said: “The much-talked-about, much-vaunted, but ill-thought-through price cap will now feel like a damp squib to most people. It may have cut bills for three months, but from 1 April, the new rate jumps up 10%.”
He warned the cap could still be higher than £1,254 a year, depending on energy usage.
But Gillian Guy, chief executive of Citizens Advice, said: “As unwelcome as this news is, it’s likely that prices would be higher still without the cap and there are steps people can take to ease the strain on their bills.
“There are big savings to be made by switching supplier or tariff. Simple steps like topping up your insulation, or installing better heating controls, can permanently reduce your bills and make your home more comfortable.”
The news comes as the strain of higher wholesale costs and the effect of the cap are showing on the energy sector, with a raft of smaller players having recently gone bust.