ENERGY prices are to rise up up to £96 a year as it emerged that the number of households in debt to their electricity provider is already at a five-year high because of the financial squeeze in the Covid-19 pandemic.

Charities have criticised the move saying the timing is a "double whammy", coming at a time when the government's Covid-related support schemes are due to be wound down.

Energy regulator Ofgem said yesterday that suppliers could pass on the cost of rising gas and electricity prices to customers meaning that for 11m typical energy customers are likely to see their bills go up by £96 to £1,138 a year from April 1. For 4m pre-payment meter customers it will go up by £87 to £1,156.

It said the price cap for default domestic energy deals will go up to cover suppliers' extra costs.

The latest announcement more than wipes out the gains that households made in October, when the price cap dropped by £84.

Citizens Advice Scotland (CAS) warned that with 1 in 4 households in Scotland already in fuel poverty, and a growing problem with fuel debt, "increasing the cap could see more people struggle".

 CAS fair markets spokesman Kate Morrison said: “The energy price cap increasing in March will hit the poorest consumers the hardest.

“The pandemic has seen all of us stay at home more - the result of that is more time with the heating on and higher bills as a result.

READ MORE: Martin Lewis on how to beat the £100 energy price hike as ScottishPower & Scottish Gas are seen as great value

“With this rise coming at the same time as plans to end the £20 per week increase to Universal Credit, consumers will face a perfect storm of reduced incomes and higher bills later this year."

It comes as official figures released under Freedom of Information and shared with the Herald by by energyhelpline.com reveals that 777,000 UK households were in debt to their electricity provider between July and September this year – the highest since 2015.

Tom Lyon, director of energy at energyhelpline.com, said: “The Ofgem announcement gives suppliers a green light to hike prices for millions of consumers who are already struggling with higher bills due to lockdown restrictions.

The Herald:

"This price cap rise is a hammer-blow for customers and will only increase the surge of energy debt this year across the country.

“It’s particularly unfortunate that price rises sanctioned by the cap will disproportionately affect the most vulnerable groups in society, including the elderly and low-income families.

“Although suppliers will be allowed to raise default tariffs prices, they do not have to. We call on providers to hold off any price increases to help households continuing to be hit hard by the pandemic, as hopes rise for the easing of restrictions from the vaccine roll out. Even just holding off for a few months could help with the financial survival of millions of consumers nationwide."

The rise comes as uSwitch details shared with the Herald revealed that just before the rise was announced almost one in ten Scottish households said they could not cope with any increase in bills.

READ MORE: Anger as energy bills to soar for millions 

And over a quarter of Scottish bill-payers (28.4%) said a £10 a month increase could force them into debt More than half of homes (53%) on standard variable tariffs and prepayment meters said stressed by just the thought of the price cap rising.

Ofgem said rising wholesale costs for energy were behind the increase, adding that the existence of the price cap meant households saved £100 a year, and they could also switch to a better deal.

The cap on electricity and gas bills came into effect in January 2019 and was aimed at ending what former Prime Minister Theresa May called “rip-off” prices by energy firms. But some consumer groups have since called it a "con" because it has not stopped rising prices.

The regulator insists the price cap "protects consumers" who have not switched energy supplier by ensuring they pay a fair price for their electricity and gas.

Founder and chief executive of Switchcraft.co.uk, Andrew Long said the "biggest scandal" in the energy market is still the way the most vulnerable customers pay the most.

"It should be illegal for prepayment customers to be charged more than people with credit meters, especially because by definition they can’t be in debt.”

Jonathan Brearley, chief executive of the regulator, said:  "Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic. We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.

"As the UK still faces challenges around Covid-19, during this exceptional time I expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need."

The Ofgem decision comes on top of an additional £23 rise that energy suppliers have been allowed to charge customers for bad debt.

During the crisis the companies have struggled to get some households to pay their bills, so Ofgem decided they needed to allow the suppliers to spread that cost across the country.

Richard Neudegg, head of regulation at the energy price comparison site Uswitch.com, said: “The pandemic has already placed many households under great financial strain. This will be a bitter pill to swallow for the 11 million default tariff customers with standard meters, many of whom are already struggling to make ends meet.

“The price cap increase is an aftershock of last year’s lockdown, partly because many customers have struggled to pay their energy bills, plunging them into debt that suppliers have been unable to recover. "