Trade body Energy UK has said that “drastically rising costs” had led to Ofgem being forced to increase the domestic energy price cap.

The energy regulator announced the default tariff price cap will rise by £117 to £1,254 per year, while the pre-payment meter cap will increase by £106 to £1,242 to “reflect higher costs”.

Energy UK said the wholesale cost of energy had risen by 17% since the previous price cap was set.

The organisation called on the UK Government to introduce a national energy efficiency programme to reduce bills for consumers.

Energy and Clean Growth Minister Claire Perry, said: “We were clear when we introduced the cap that prices can go up but also down. The key thing is that as a result of the cap, 11 million households on standard variable tariffs will be £75 to £100 better off and energy suppliers will no longer be able to rip off customers on poor value tariffs.”

“With over 60 companies and more than 200 tariffs to choose from, consumers can always shop around for a cheaper deal and make big savings by switching.”

'Eye-watering increase’

Consumer groups gave a mixed response to the price rise, with Alex Neill, Managing Director of Home Services at Which?, saying: “This eye-watering increase to the price cap will be a shock to the system for people who thought that it would protect them from rising bills.”

But Gillian Guy, Chief Executive of Citizens Advice, pointed out: “Unfortunately, price rises were inevitable as the cost of supplying electricity and gas to our homes has been increasing."

“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.”

> View Ofgem's announcement