The cost hike will affect 11 million families on default or “standard variable” tariffs who have not switched suppliers in the past year.
An additional 4 million households with pre-payment meters will face a similar increase.
In October, average annual bills will go up from £1,138 to around £1,288, an increase of 13 per cent. The move will affect significant numbers of the UK’s most vulnerable households who are more likely to be on default tariffs or pre-payment meters.
Ofgem reviews the cap, which was introduced in 2019, every six months. The rising cap is mainly due to soaring wholesale energy costs, in a year that has seen gas prices increase by 55 per cent since January.
It comes as Boris Johnson has been urged to step up efforts to meet his commitment to hit net-zero emissions by 2050 ahead of the Cop26 climate conference in Glasgow.
Craig Mackinlay, Conservative MP for South Thanet, told The Times: “The main driver of this current price hike is broadly due to wholesale gas prices. With a dash to uncosted net zero, this rise will be the first of even more catastrophic rises to family fuel bills.”
Jonathan Brearley, the Ofgem chief executive, explained the increase in a blog.
“When legitimate costs of supplying energy increase, this needs to be reflected in the price cap,” he wrote. “Without this, companies would be unable to continue to supply energy to their customers.”
“Regrettably, the increase in wholesale costs will feed through to this price cap and, although final analysis is not complete and other costs will also determine the overall level, it could add around £150 per household to the next level of the price cap,” Mr Brearley wrote.