Average household energy bills will fall by 7 per cent from July after Ofgem announced it was lowering its energy price cap in response to lower wholesale prices.

The regulator announced it was dropping its price cap from £1,690 to £1,568 for a typical household in England, Scotland and Wales.

The new cap is around £500 lower than at the same time last year.

The cap does not set the maximum a household will pay for their energy but limits the amount providers can charge them per unit of gas or electricity, so those who use more energy will pay more.

Citizens Advice chief executive Dame Clare Moriarty said: “Today’s news will give small comfort to households still facing cost-of-living pressures.

“The fall in the energy price cap reduces bills slightly, but our data tells us millions have fallen into the red or are unable to cover their essential costs every month.

“People cannot rely on lower energy prices alone to escape the financial issues they’ve been experiencing.

“That’s why we need better targeted energy bill support for those really struggling to keep the lights on or cook a hot meal.”

The latest fall offers further relief to households given the previous quarter-on-quarter drop seen in April, but analysts have said they expect Ofgem to increase the price cap in October, before dropping it again in January 2025.

Ofgem changes the price cap every three months based on several factors, the most important of which is the price of energy on wholesale markets.

Ofgem is currently reviewing the price cap and looking at how it is calculated.

This includes mulling over changes to standing charges, which are fixed daily charges that cover the cost of supply connections.

Mike Thornton, chief executive of the Energy Saving Trust, said: “Today’s confirmation that energy prices are coming down for the next quarter is very welcome.

“However, no-one should take this lower price cap as a sign of stability.

“Forecasts show that energy prices are set to rise again this autumn and will be staying high overall for the next decade.

“After the election the incoming UK government must prioritise policies that support people to use less energy and install cost-effective energy efficiency improvements in their homes.

“This will be fundamental to bringing down energy bills, reducing carbon emissions and guaranteeing our energy security for the long term.”