Energy regulator Ofgem has reduced the level of the price cap on customers’ bills by £84 a year.
The price cap for the coming winter period (October-March) will now be £1,042 against £1,126 currently.
The level of the cap for pre-payment meters will fall by £95 from £1,164 to £1,070 per year for the same six month period.
Ofgem said it is the lowest level of the cap since it was introduced on January 1, 2019, and reflects a sharp decrease in wholesale gas prices since the last update in February.
Because of that, most savings will be on gas bills and customers who use only electricity will make savings, but these will be significantly lower overall.
The regulator added the coronavirus (COVID-19) crisis has depressed energy demand although wholesale gas prices have started to recover since hitting 20-year lows in the spring.
Ofgem has recommended the price cap remains in place in 2021 but added if wholesale energy prices continue to rise over the coming months, the cap is likely to rise in April to reflect these higher costs.
The level of the cap is adjusted twice a year to reflect the estimated costs of supplying electricity and gas to homes for the next six-month period.
In a statement, Jonathan Brearley, chief executive of Ofgem, said: “Millions of households, many of whom face financial hardship due to the COVID-19 crisis, will see big savings on their energy bills this winter when the level of the cap is reduced.
“They can also reduce their energy bills further by shopping around for a better deal. Ofgem will continue to protect consumers in the difficult months ahead as we work with industry and government to build a greener, fairer energy market.”
The price cap is on a unit of gas and electricity with standing charges taken into account, says Ofgem. It is not a cap on customers’ overall energy bills.