(Reuters) - Britain's regulator said energy suppliers could increase consumer bills by 117 pounds a year from April 1 as it announced an increase in its annual price cap on Thursday, due to rising wholesale costs.
Ofgem was tasked by parliament to set a limit after lawmakers said customers were being overcharged for electricity and gas. Prime Minister Theresa May had called the tariffs a "rip-off".
Ofgem said it needed to allow suppliers to charge more as wholesale energy contracts, used to help formulate the cap level, were 17 percent higher than during the last cap period.
"We can assure these customers... that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering," Ofgem chief executive Dermot Nolan said.
The cap for average annual consumption will rise to 1,254 pounds from 1,137 pounds for customers on the most commonly used tariffs.
Ofgem calculates the cap using a formula that includes wholesale gas prices, energy suppliers network costs and costs of government policies, such as renewable power subsidies.
Several of Britain's biggest suppliers, a group known as the "Big Six," complained that the cap was initially set too low.
Most are expected to increase prices once it is raised.The big six energy suppliers are Centrica's British Gas, SSE, Iberdrola's Scottish Power, Innogy's npower, E.ON and EDF Energy.
(Reporting By Susanna Twidale in London and Arathy S Nair in Bengaluru; Editing by Arun Koyyur and Toby Chopra)