Millions of people have been struggling to pay their energy bills with money-saving experts warning that many are being forced to choose between 'heating or eating'.
In an effort to help offset the rising price of energy, Chancellor Rishi Sunak has announced that every household in the UK is set to be given up to £350.
It comes as energy regulator Ofgem has confirmed that household energy bills will soar by £693 per year from the beginning of April.
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The regulator was forced to hike the energy price cap to a record £1,971 for a typical household as gas prices soared to unprecedented highs.
For customers with prepayment meters the price cap will go up by £708 to £2,017, the regulator added.
The decision is likely to impact 22 million households across Great Britain, and applies to those who are on their energy supplier’s default tariff.
Shortly after the announcement, Chancellor Rishi Sunak promised to “take the sting out” of the price rises.
He promised that 28 million households in Britain would get a £200 upfront rebate on their energy bills from October.
The Government will provide the cash for this, but it wants the money back so will hike bills by £40 per year over the next five years from 2023 to recoup its cash.
If all goes to plan, wholesale energy prices will drop so households can pay back what they owe, without a major rise in bills.
Mr Sunak also promised a £150 council tax rebate for homes in bands A to D, something he said would cover around 80% of homes in England.
He also promised £144m to councils to support vulnerable people.
“The energy regular Ofgem announced this morning that the energy price cap will rise in April to £1,971, an increase of £693 for the average household," Mr Sunak said.
“Without Government action, this could be incredibly tough for millions of hardworking families.
"So the Government is going to step in to directly help people manage those extra costs.”
Mr Sunak continued: "Without Government intervention, the increase in the price cap would leave the average household having to find an extra £693, the actions I’m announcing today will provide to the vast majority of households just over half of that amount, £350.
“In total the Government is going to help around 28 million households this year.
"Taken together this is a plan to help with the cost of living worth around nine billion.
“We are delivering that support in three different ways.
"First we will spread the worst of the extra costs of this year’s energy price shock over time.
"This year all domestic electricity customers will receive an upfront discount on their bills worth £200.
“Energy suppliers will apply the discount on people’s bills from October with the Government meeting the cost in full, that discount will automatically be repaid from people’s bills in equal £40 instalments over the next five years.”
Why are energy bills going up?
Much of the increase reflects the soaring cost of gas, not electricity, the Manchester Evening News reports.
Reasons behind this rise include supply and demand, as there was a very cold winter in Europe last year.
British homes are heavily reliant on gas, making the problem worse.
Most homes (86.3%) have gas central heating, the Office for National Statistics (ONS) said this week.
The cost of most energy bills is capped by the energy regulator, Ofgem.
This cap limits the amount firms can charge the average customer on their default gas and electricity tariffs - usually variable-rate deals.
It is technically a cap on how much energy firms can ask you to pay for rates.
The regulator has confirmed it has been forced to hike the energy price cap to a record £1,971 for a typical household as gas prices soared to unprecedented highs.
For customers with prepayment meters the price cap will go up by £708 to £2,017, the regulator added.
