MILLIONS of households will see their energy bills rise by over £100 each year as Ofgem increases the price it lets suppliers charge for energy.

The regulator has announced it will hike the government's energy price cap, which was meant to save customers from expensive deals, by £117 from April 1.

About 11 million households are on default, or standard variable tariffs, and are set to be affected.

Such a household, which uses a typical amount of energy and pays the bill by direct debit, should now expect to pay £1,254 a year.

The price cap will also affect those on prepayment meters - around four million people - with the typical customer soon paying £1,242 per year, up by £106 from the previous cap level.

A majority of the £117 increase in the cap is due to higher wholesale energy costs for suppliers, Ofgem said.

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Yet the hike has been slammed by consumer groups as it wipes out the yearly savings of £76 that households were promised when the latest price cap came into force in January.

If you are on a default tariff, you should shop around for a better deal.

Stephen Murray, energy expert at comparison website MoneySuperMarket, said: "Today’s £117 rise is even higher than the large increase that was widely predicted over the last few weeks, and it deals an even more significant blow to millions of households who were relying on the cap to save them money.

"The cap was put in place to protect consumers from overpaying on their energy, but right now it’s doing anything but that.

"It’s only taken five weeks for it all to unravel, and households up and down the country will be scratching their heads in confusion and wondering how the claims of ‘fair prices’ and ‘£76 per year saving’ have disappeared, and so quickly."

Meanwhile, Martin Lewis, founder of consumer website MoneySavingExpert, also warned people to keep in mind that the new price cap isn't the maximum they'll pay.

He said: "The much-talked-about, much-vaunted, but ill-thought-through price cap will now feel like a damp squib to most people. It may have cut bills for three months, but from 1 April, the new rate jumps up 10 per cent.

"The price cap is itself misnamed. The new £1,254 figure is not the maximum anyone will pay. It's a rate cap not a price cap."

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"Your cap depends on your usage, the £1,254 figure is a nominal one, showing what the cap would be for someone with typical usage," Martin added.

"The worry is the cap gives people a false sense of protection. Yet the message now is the same as it has always been. Do not simply sit on your hands and stick with your energy provider’s capped standard tariff – that just means you’re ripping yourself off."

Dermot Nolan, chief executive of Ofgem, said: "Under the caps, households on default tariffs are protected and will always pay a fair price for their energy, even though the levels will increase.

"We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering."

And Claire Perry, energy and clean growth minister, said: "These increases reflect the sharp rise in gas and electricity costs. The cap is designed to ensure energy companies offer good value to their customers and continue to thrive as an efficient business.

"The key thing is that as a result of the cap, 11 million households on standard variable tariffs will be £75 to £100 better off and energy suppliers will no longer be able to rip off customers on poor value tariffs."

Earlier this year, the Big Six energy firms were accused of running cartel by charging very similar prices.