Criticism has been levelled at the record 54 per cent hike on the energy price cap amid concerns about a “cost of living tsunami”.
The increase will see a £693 rise in energy bills from 1st April.
Chancellor Rishi Sunak outlined plans on Thursday to give a £200 rebate on energy bills for households from October.
That will be paid back over the next five years at £40 per year, starting in April 2023 – although analysts suggest bills could continue to rise.
Mr Sunak also announced measures to allow councils in England to give a rebate of £150 for households in council tax bands A to D, with additional funding released to allow the Scottish government to do the same.
First Minister Nicola Sturgeon has indicated that this funding will be used in the same way.
The regulator’s new price limit means 18 million households will typically pay £1,971 a year for gas and electricity.
Another 4.5 million people on prepayment meters will see an even bigger increase of £708 a year.
Isles MP Alistair Carmichael criticised the government.
“The news that the energy price cap will be hiked to the highest level ever in April is unwelcome to say the least,” he said.
“We have to question the value of a price cap that can leap by 54 per cent in one bound.
“If this is a measure to protect families from soaring energy costs then it does not feel all that protective.
“While the measures announced today may reduce the immediate harm to some extent the chancellor appears to be gambling on the idea that energy costs will quickly drop again.
“If he is wrong then this ‘rebate and repay later’ strategy is only likely to extend the pain for families struggling with their energy bills.”
He added: “This ought to be the moment to reconsider the cuts to Universal Credit and the National Insurance tax hike which are compounding the squeeze on the worst-off.
“The Bank of England has just predicted inflation to rise to over seven per cent by the spring – if we are to mitigate what is turning into a cost-of-living tsunami then we need a bit more ambition to support struggling families now.”