Ofgem has announced it will lower the level of a prepayment price cap which is expected to cut bills for around three million households.
The change, which will come into effect on 1st October, will reduce energy bills for householders who prepay for their electricity, mostly with traditional coin or token operated prepayment meters.
The regulator initially introduced the temporary safeguard tariff in April this year and will update it every six months.
The average cap was set at between £547.07 and £625.85 per year for electricity and £520.07 for gas – but this will now fall to between £528.28 and £600.13 for electricity and £519.74 for gas.
Prepayment dual fuel customers will see their bills reduce from £1,067 to £1,048 – an average reduction of £19 a year.
Customers with Economy 7 meters could see smaller reductions.
As of December 2015, there were 4.5 million prepayment electricity accounts and 3.5 million prepayment gas accounts – representing 17% of all domestic electricity accounts and 15% of all domestic gas accounts.
The news comes as an independent review, which will look at how the energy industry, government and regulators can keep electricity costs as low as possible, has been launched.