OFGEM’S “outrageous” tax on households is “simply not fair,” campaigners said today after the energy watchdog announced plans to lift the price cap to help suppliers cover the cost of supporting consumers who can’t afford to pay their bills.

The body said it wanted energy companies to use the extra money they receive from the cap increase to recover nearly £3 billion from customers who cannot pay their bills.

It is proposing a one-off price cap adjustment of £16, equivalent to around £1.33 a month, between next April and March 2025.

Households on prepayment meters will not be affected.

Ofgem said the additional costs would ensure that suppliers have the resources they need to support struggling customers by setting up payment plans, writing off unmanageable debt on a case-by-case basis and working out affordable repayment holidays.

The plan comes as gas and electricity prices remain high and wider cost-of-living pressures mean that energy debt is now at a record level, according to new Ofgem figures.

Last month, the regulator said that it would raise the price cap from the current £1,834 for a typical dual-fuel household to £1,928 from January 1.

Simon Francis, co-ordinator of the End Fuel Poverty Coalition which is part of the Warm This Winter campaign, told the Morning Star: “This outrageous tax on energy consumers is simply not fair.

“Energy suppliers have posted billions in profits already this year while millions of people struggle in cold damp homes.

“The record levels of energy debt are due to Britain’s broken energy system, not the fault of the hard-pressed public.”

Mr Francis said that warm words from Ofgem asking firms to better support customers in return for the increase in their bills “won’t solve the problem.

He said: “As energy prices have soared, people have used up savings, credit cards and cut back on essentials to try and keep up with their bills.

“We have called for the government to introduce a ‘help to repay scheme’ for homes in energy debt.

“But ministers have refused to listen and now customers will pay the price of their inaction.”

Fuel Poverty Action spokesman Jonathan Bean hit out at Ofgem for further boosting energy firm profits, arguing that radical reform is needed to “end corporate profiteering and provide everyone [with] the essential energy needed to stay warm and safe.”