Millions of people will face higher energy bills as the price cap is increased.

Energy regulator Ofgem has announced it will increase its price cap from £1,971 per year for the average household to £3,549 from October this year, an 80pc rise.

Prepayment bills will also rise from £2,017 to £3,608 on October 1.

Costs are expected to rise again in January 2023.

The energy price cap is the maximum amount companies can charge for each unit of gas and electricity they use, the cap applies to around 24 million homes in England, Scotland and Wales.

It comes as prices soar due to the ongoing war in Ukraine, which has prevented the UK from obtaining supplies from Russia, and amid the ongoing cost of living crisis with prices increasing and taxes and interest rates also going up.

Following the announcement, Ofgem CEO Jonathan Brearley said the government would need to add to the support it announced in May.

He said: "“The government support package is delivering help right now, but it’s clear the new prime minister will need to act further to tackle the impact of the price rises that are coming in October and next year.

“We are working with ministers, consumer groups and industry on a set of options for the incoming prime minister that will require urgent action.

“The response will need to match the scale of the crisis we have before us. With the right support in place and with regulator, government, industry and consumers working together, we can find a way through this.”

Chancellor Nadhim Zahawi said the increase in the energy price cap would cause “stress and anxiety” for people but that the Government was working to develop more options to support households.

He said: “I know the energy price cap announcement this morning will cause stress and anxiety for many people, but help is coming with £400 off energy bills for all, the second instalment of a £650 payment for vulnerable households, and £300 for all pensioners."

Labour shadow chancellor Rachel Reeves, responding to the rise in the energy price cap, said: “This is incredibly worrying and will strike fear in the heart of many families.

“We cannot wait any longer to act, this is a national emergency.

“The Tories must freeze energy bills now so households don’t pay a penny more in winter."