Millions of households will see their energy bills rise to a typical £1,971 a year after regulator Ofgem increased its price cap by 54%.

The increase, which will on average see bills for 22 million customers on variable gas and electricity tariffs rise by £693, will take effect in April and follows a 12% rise in October.

Surging wholesale gas prices – currently about four times higher than at the same time last year – have driven the increase.

It adds to a cost of living squeeze for households who are also facing higher shop prices, an increase in national insurance, and rising interest rates.

What is the energy price cap?

The energy price cap sets the maximum figure that can be charged to customers on a variable dual-fuel rate for typical usage of gas and electricity for a six-month period.

Introduced in 2019 it is based on a number of factors including the wholesale cost of power in the previous six months.

The price cap is not the maximum that anyone can be charged – customers with high energy usage will have higher bills – but rather reflects typical usage levels.