Ofgem has said that the proposed energy price cap of £1,136 could have 11 million households an average of £75, as concerns mount over the cost of energy.
The plan is set to be confirmed in November and is expected to take effect by the end of December and will remain in place until 2023.
The cap, which was described as “tough” by the energy regulator will provide fairer deals for consumers by forcing suppliers to cut prices to the level of the cap or below.
However, despite UK Prime Minister Theresa May’s promise that the policy would prevent large hikes in bills, analysts have noted that the rising costs of wholesale gas and electricity costs could the price cap increase by as much as £123 by spring.
Brexit also threatens to heighten UK energy bills if barriers to trade are imposed on the energy industry that would increase the cost of importing gas and electricity to and from Europe, which would then be passed on to consumers.
Earlier this year, a report highlighted the vulnerability of the UK energy sector, stating that it could not rely on gas imports from Europe during cases of extreme weather, which came as “the Beast from the East” saw wholesale prices jump to five times the average for the first quarter, reaching its highest point at £990 per MWh, as a result of a surge in demand.
The UK Government gave Ofgem the power to introduce the cap in July in its efforts to help consumers struggling with the rising costs of energy bills.
Ofgem chief executive Dermot Nolan said: “Once the price cap is in place, all households in Great Britain covered by the cap will be protected from being overcharged for their energy.”