New energy price cap sees bills set to rise by almost £700 a year

The cost of gas and electricity will rocket by more than 50% after a new energy price cap was announced.

Consumers will see bills rise by £693 a year after regulator Ofgem hiked the price cap to £1971.

Meanwhile customers with prepayment meters will see bills soar by £708 to £2017, the regulator added.

The decision comes as gas prices soared to unprecedented highs.

The 54% increase was announced on Thursday amid warnings that millions unable to heat or power their homes could be thrown into fuel poverty.

Government analysis estimates the increase could mean a further 211,000 households in Scotland will not be able to afford to power or heat their homes.

Chancellor Rishi Sunak announced a series of measures to tackle the price hike for customers, including an upfront £200 discount on energy bills.

People in England are set to receive a £150 council tax rebate to help with costs, which will not apply in Scotland.

Instead, £565m of Barnett funding will be shared with devolved governments in Scotland, Wales and Northern Ireland, with the Scottish Government set to decide how to use the extra funding.

Sunak said: “We will spread the worst of the extra costs of this year’s energy price shock over time. This year all domestic electricity customers will receive an up front discount on their bills worth £200.

“Energy suppliers will apply the discount on people’s bills from October with the Government meeting the cost in full, that discount will automatically be repaid from people’s bills in equal £40 instalments over the next five years.”

On Friday, Ofgem plans set out new rules which will allow it to change the energy price cap in between its regular six-month reviews.

The regulator pledged the power will only be used in exceptional circumstances, and five tests will have to be passed before it can step in.

The price cap had already been set at a record high in October before the worst of the gas price spike had been seen in the market.

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.”