Most British households will face higher energy bills from January after regulator Ofgem increased its price cap by 5% to reflect a rise in wholesale energy prices.

The increase comes as many Britons contend with a cost of living squeeze and the government continues to grapple inflation. Though inflation slowed sharply last month, that was partly down to lower energy costs.

The price cap rise "is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay", Ofgem CEO Jonathan Brearley said in a statement.

Benchmark British wholesale gas prices have risen by about 30% since the beginning of September.

Gas prices usually rise in the winter alongside increasing demand demand, particularly for heating. However, wholesale prices have also been driven higher by global events such as the war in Ukraine, Ofgem said.

Ofgem's new cap of 1,928 pounds ($2,402.48) a year for average use of electricity and gas, is up 94 pounds from the previous cap.

About 29 million customers are on standard rate tariffs covered by the price cap, which was introduced in 2019 to protect consumers. ($1 = 0.8025 pounds) (Reporting by Susanna Twidale in London and Yadarisa Shabong in Bengaluru Editing by David Goodman )