The government will have to pay billions of pounds more to support households with their energy bills from January, after the regulator increased its energy price cap.
But it will not affect households as the government is limiting their bills.
Under the Energy Price Guarantee (EPG), the typical household is currently paying £2,500 a year for energy.
But Ofgem said that without government support households would have paid £4,279 from January.
Craig Lowrey, a principal consultant at research firm Cornwall Insight said the rise would be “concerning to the government, who will be shouldering the billions of pounds needed to compensate suppliers the difference”.
In normal times, the energy price cap would set the maximum amount suppliers can charge households per unit of energy.
But since October it has been superseded by the government’s EPG, which is protecting people as energy prices soar in the wake of Russia’s invasion of Ukraine.
Under the EPG, suppliers can charge a maximum of 34p per unit for electricity and 10.3p for gas until April, when the rate will go up slightly.
The government is paying the energy firms for the shortfall.
Without the government’s intervention, however, consumers would have had to pay 67p per unit for electricity and 17p for gas from January.
Ofgem’s announcement means the government action will save typical households around £1,779 a year, compared with what they would have had to pay under the regulator’s cap.