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LONDON — Energy bills are set to rise drastically in the U.K. after the country’s energy regulator announced its cap on prices would rise by 50% in April.

The U.K. has limits on how much suppliers are able to charge consumers for energy, with price caps reviewed by the government every six months.

Ofgem, Britain’s energy sector regulator, said on Thursday that its price cap — under which the average household’s annual energy bill is currently between £1,277 ($1,730) and £1,370 — would be raised by 54%, marking a record-breaking increase.

That means many households could see their energy bills rise by more than £700 a year.

Wholesale natural gas prices reached record highs in Europe last year, caused by a number of issues including low inventories and Russia tightening its gas supply to the EU, creating an energy crisis across the region that many countries are still grappling with.

But the U.K. has been hit particularly hard due to its heavy reliance on gas as an energy source.

More than 22 million British households are connected to the country’s gas grid. Britain’s largest single source of gas is the U.K. Continental Shelf, which made up around 48% of total supply in 2020. However, the UCS is a mature source, meaning it must be supplemented with gas imported from international markets.

U.K. day ahead prices for wholesale natural gas were trading at around £1.75 per therm on Thursday, up slightly from the previous day. Meanwhile, front month contracts gained around 3% to trade at around £1.89 per therm.

Day ahead prices peaked in December, when they rose above £4.50 per therm.

Several of the U.K.’s energy suppliers collapsed last year thanks to the soaring cost of wholesale gas, with those that have managed to survive the crisis urging the government to remove or raise the price cap.

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