The new cap, introduced by Ofgem, means more than half of British households could see their bills rise by around £117 a year on average.
Ofgem, which sets the maximum prices that can be charged for gas and electricity to those on default tariffs, said it was upping the limit to allow suppliers to cover the higher costs they are facing on the wholesale market.
Oil prices have risen steadily over the past few years. Back at the end of 2015, the cost of a barrel of the black stuff fell to below US$30, but it has since climbed back up to just above US$60.
“We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering," said Dermot Nolan, chief executive of Ofgem.
The cap is per unit of energy and not on the total bill, so people who use more energy will still pay more than those who use less.
It comes into force at the start of April and will be reassessed every six months.
Shares in Centrica, Britain’s largest energy supplier, climbed 1.1% to 139.8p on Thursday morning.