Energy prices for millions of British households are set to rise in April after the energy regulator announced a 54% increase in its pricing cap, leading the government to announce a new multi-billion-pound package of assistance for hard-hit households.
In response to record worldwide gas prices last year, regulator Ofgem said that the price cap would climb by 54% to 1,971 pounds per year beginning in April, the same month when taxes rise and general inflation is expected to peak at 6%.
At 1200 GMT on Thursday, the Bank of England is also expected to announce another rate hike.
According to Jonathan Brearley, chief executive of Ofgem, the energy market has seen an unprecedented surge in worldwide gas prices, a once-in-a-30-year event.
"The role of Ofgem as the energy regulator is to ensure that, under the price cap, energy providers can only charge a fair price based on the true cost of supplying electricity and gas," he said in a statement.
Governments across Europe have spent tens of billions of euros to protect customers from record high energy prices, either by removing taxes or assisting the most needy, after gas and power prices skyrocketed when economies reopened following COVID-19 lockdowns.
In the UK, a six-month price cap has minimised the immediate impact on customers, shifting the pain to suppliers, with more than 25 going out of business since the beginning of 2021. Many had not hedged against future cost increases.
On Thursday, Ofgem also stated that it would consider changing the frequency with which it can update the price cap in order to ensure that it reflects the true cost of the market.