The price most households pay for energy will fall by 7% from April 1, driven by the Government’s promised £150 cut to the average bill, Ofgem said.
The regulator’s price cap will drop from the current £1,758 to £1,641 – a reduction of around £10 a month for the average household using both electricity and gas.
Chancellor Rachel Reeves said in November that £150 would be cut from the average household bill from April by scrapping the Energy Company Obligation (Eco) scheme introduced by the Conservatives in government.
Tim Jarvis, director general of markets at Ofgem, said: “Today’s announcement will be welcome news for many households.
“Wholesale energy prices have fallen in recent months, and we’re investing in our network to safeguard the future energy system.
“The main driver of today’s reduction is the change to policy costs announced by the Chancellor in the budget.
“Our focus at Ofgem remains on bearing down on the costs within our control, and unlocking the investment needed to support the transition to a more stable energy system over the longer term.
“We’re also seeing encouraging signs of greater engagement and competition, with switching increasing by almost 20% year on year.”
The Government has told firms that it expects the savings to be passed on in full to all customers from April 1, including those already signed up to fixed tariffs.
However, customers have already been advised that the cut to their bill will depend on the size and type of household and how much energy it uses.
Part of the Government’s planned average £150 cut has also been offset by the rising cost of upgrading electricity and gas networks, dropping Ofgem’s overall cut to the price cap to £117.
Ofgem also confirmed a decision to move the costs of the Government’s separate Warm Home Discount from standing charges – the flat rate households pay each day to have energy supplied to their homes – to the hourly unit rate of gas and electricity.
As a result, standing charges will drop by an average of £13, or 4p a day, for customers using both electricity and gas.
Citizens Advice chief executive Dame Clare Moriarty said: “A fall in energy prices is welcome but for many people bills remain stubbornly high. For millions of households this has stopped being a temporary hardship and become an ongoing threat to their financial stability.
“The divide between those who can and cannot keep their homes warm and safe demands urgent action. Too many people, particularly those with disabilities, families with children, and renters, remain trapped in cold, damp homes they cannot afford to heat.”
Dhara Vyas, the chief executive of Energy UK, which represents firms, said: “Today’s reduction in the energy price cap is a welcome first step by the Government toward providing meaningful support for households, helping make it more affordable for people to keep their homes safe, comfortable, and warm.
“While everyone should see savings on their bills from April 1, the effect of moving some policy costs off the gas and electricity unit price will be different. It depends on each household’s energy use, the type of building you live in, how many people live in the property, and even how the bill is paid.
