Ofgem has today announced that the energy price cap will return to pre-pandemic levels from April due to changes in wholesale prices.
The price cap will increase by £96 to £1,138 for 11 million default tariff customers.
There will be an £87 increase to £1,156 for those using payment meter.
Ofgem has allowed the increases to cover higher levels of debt from customers unable to pay their energy bills due to the Covid-19 impact.
Jonathan Brearley, CEO of Ofgem, said: “Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic.
“We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.”
The price cap level fell by £84 in October in reaction to a sharp fall in wholesale prices, its lowest level yet for the winter period.
Demand for energy has since recovered, pushing wholesale price back up to more normal levels.
The cap protects consumers who have not switched energy supplier by ensuring they pay a fair price for their electricity and gas.
Households on default tariffs are saving an estimated £75 to £100 a year as a result.
Customers who want to avoid the increase should shop around ahead of the rise on 1 April 2021.
CEO Brearley added: “The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal.
“As the UK still faces challenges around COVID-19, during this exceptional time I expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need.”