Households face a winter squeeze from energy bills as regulator Ofgem raised the price cap to a three-year high.

The energy price cap will rise by 4 per cent from October 1 for a typical household in England, Scotland and Wales, an increase the energy secretary admitted will not cover the prime minister’s formerly announced help on energy bills.

Ofgem said the price cap will rise by £60 per year – or £5 per month – to £1,723 for the average household using both electricity and gas if this level was sustained for a year.

It comes after the Middle East conflict affected wholesale prices.

The ongoing heatwaves across Europe have added further pressure by increasing gas demand for power generation to meet air conditioning and cooling demand.

The government “will keep looking at what more we can do to protect families from unaffordable bills”, the energy secretary has said.

Reacting to the energy price cap rise, Miatta Fahnbulleh said: “Families will be understandably concerned about the cost of energy bills this winter, which is being driven up by the Iran war.

“Energy is an everyday essential and it needs to be affordable for everyone, which is why we have cut VAT on electricity bills from October, to give families some breathing space.

“This has limited the rise in the price cap and follows the £150 in costs we removed from bills earlier this year, and we will keep looking at what more we can do to protect families from unaffordable bills.”

But she admitted the prime minister’s energy measures won't cover price cap increase, telling Sky News: “It doesn't, but it helps.

“So it's £45 lower than it would have been had we not acted. But look, we know that there is more that we need to do.”

Experts at Cornwall Insight predicted last week that a typical household will face an annual bill of £1,729, up from £1,663, based on Ofgem’s updated definition of a typical consumer, which came into effect from July to reflect falling household energy use. It said this would be the equivalent of £1,941 per year based on its previous calculations, up from £1,862 currently.

It marks the highest average bill since July 2023.

Asked if she was frustrated about the impact of Donald Trump’s war on Iran had raised prices, Ms Fahnbulleh said: “ I am frustrated that global events are having an impact on households, businesses in this country.

“Of course I am, and you know when you're working to do things like increasing the amount of clean power to drive down bills, and then you've got shocks like that that then increase bills. That is massively difficult for families, but it's hugely frustrating for government as well.”

However, she denied the government’s drive to net zero had pushed up energy bills, and said: “Well, so it's simply not true, and when I talk about clean power, it is, yes, good for the environment - but it's absolutely critical to our strategy to delivering bills that are more affordable because it breaks that link to global fossil fuel markets.”

Neil Kenward, Ofgem’s director general for markets, said: “High international gas prices are continuing to drive energy costs in the UK.

“We welcome the Government’s intervention to remove VAT from electricity bills, without which customers would have faced even higher costs this winter.

“Savings are available by choosing a fixed tariff, which are available at £100 or more below the October price cap, and many suppliers offer tariffs with cheaper electricity to smart meter customers for electricity consumed out of peak times.

“It’s also worth considering different payment methods, with prepayment customers paying the lowest price cap rates, and could save consumers an average of about £45 compared to direct debit.”

The energy price cap was introduced by the Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.

It aims to ensure that prices for customers on default energy tariffs are a fair reflection of the cost paid by suppliers for wholesale energy, and that the profit firms make is capped.

Ofgem sets its cap every three months as the average amount paid by the typical household.