The Big Six energy firm said the move, which will affect 1.4 million customers on a standard variable tariff, comes in the face of rising wholesale energy costs. It will come into effect on 16 March.
Simon Stacey, managing director of Npower’s domestic markets, said it was a “hugely difficult decision”.
But energy regulator Ofgem rebuked the company, saying it does not see “any case” for significant price increases where suppliers have bought energy in advance, and demanded the firm justify the decision to its customers.
An Ofgem spokesman said: “Our new supplier cost index shows that costs for energy suppliers have risen over the past year after having fallen for the previous two to three years.
“However, we don’t see any case for significant price increases where suppliers have bought energy well in advance. Npower must therefore justify the decision to its customers.”
Mr Stacey insisted Npower delayed the date the increase takes effect “until after the coldest months of the year” and said that its most vulnerable customers will not be affected until May.
However, Prime Minister Theresa May’s spokesman said that the government was “concerned” about the move.
He said: “Obviously, we are concerned by Npower’s planned increases. The government is committed to getting the best deal for households. Suppliers are protected from the recent fluctuations in the wholesale energy prices in which they are buying up to two years in advance.
“So we expect energy companies to treat their customers fairly, and are being clear that where markets aren’t working we are prepared to act.”
Npower’s price hike on typical dual fuel annual energy bills is made up of an average increase of 4.8 per cent on gas and 15 per cent on electricity.
The firm also said that 1.4 million fixed rate and pre-payment customers will not be affected by the increase.
It said: “Since Npower last raised its prices three years ago, there have been increases in wholesale energy costs and rises in the cost of delivering government policies, such as smart metering, renewables obligation and the capacity market. This trend is set to continue.”
The move comes after rival EDF hiked prices in December.
Experts believe Npower’s decision could be followed by other energy providers ramping up prices.
Consumers are already facing soaring prices this year following the collapse in the value of the pound.