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What is the energy price cap and how high will bills go?

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​UK households will find out how much their bills will increase when the new energy price cap is announced on Friday.

The average annual bill for gas and electricity could reach £4,650 in January when the cap is next reviewed, according to analysts Cornwall Insight.

However, plans to make energy cheaper for households who use less during peak times are expected in early September.

What is the energy price cap?

The price cap is set by Ofgem, the energy regulator. It sets the maximum price that energy companies can charge households on a standard variable tariff for each unit of energy (kilowatt hour or KwH) they use.

It's based on how much the companies have to pay the firms which produce electricity and gas, and is now reviewed every three months.

Ofgem then calculates how much a household which uses the average amount of energy will have to pay over a 12-month period - assuming they pay by direct debt.

People who use comparatively more energy will pay more, while the bill will be cheaper for those who use less.

Customers who don't pay by direct debit or who use prepayment meters pay more for the energy they use.

The price cap applies in England, Scotland and Wales, and is designed to protect consumers from short-term changes.

Energy prices in Northern Ireland are controlled separately, but have also risen sharply.

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