A cap on electricity and gas bills came into effect in January 2019 and was a flagship policy of former British Prime Minister Theresa May to end what she called "rip-off" prices.

Ofgem reduced the cap from Oct. 1 to its lowest level since the cap's introduction, citing a drop in wholesale gas prices as lockdowns on business and homes led to a slump in demand.

Since then, however, the growing economic impact of the pandemic has left more households struggling to pay their energy bills, Ofgem said, adding that an expected rise in unpaid bills this winter will place additional strain on supplier finances.

The watchdog said it is considering a revision of the price cap from April 1.

"In our consultation, we are looking at allowing for an annual increase in costs of 21 pounds per household to allow suppliers to recover these higher costs," Ofgem said.

However, with the planned removal of a previous temporary price increase, the total rise would be 6 pounds, it added.

The consultation will be open until Dec. 21.

(Reporting by Nora Buli in Oslo; Editing by Nina Chestney and David Goodman)

By Nora Buli