Fifteen million households will see their energy bills increase by almost £100 a year from Thursday after Ofgem said suppliers could pass on the rising cost of gas and electricity to customers.

The regulator announced in February that its price cap for the 11 million British households that are on their supplier’s default tariff could rise by £96 to £1,138 from April 1.

A further four million households with pre-payment meters could see their bills jump by £87 to £1,156.

Consumers have been urged to shop around for the cheapest deal since the increase was announced.

Ofgem’s decision followed an additional £23 rise that energy suppliers have been allowed to charge customers for bad debt.

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

The latest increase more than wipes out the gains that consumers made in October, when the price cap dropped by £84 to a record low since the policy was introduced in January 2019.

It comes as unemployment hit 1.7 million in January and 4.7 million people are on furlough.

Ofgem reviews and changes the price cap once every six months.

The £1,138 annual cap is calculated based on the usage of an average household. Energy suppliers are required to price below that cap, with most setting prices just a couple of pounds under.

Citizens Advice acting chief executive Alistair Cromwell said: “With the rise in the energy price cap, many will have to pay more and rightly expect a decent service. Suppliers must step up to give their customers what they deserve.

“Everyone should consider whether they are getting value for money from their supplier – paying more doesn’t always mean you will receive a better service.

“Don’t put up with it if it’s not good enough. Shop around if you can.”