Energy bills will fall by up to £95 a year for more than 15 million households in the UK from October.
Ofgem has announced the new level of the price cap which for customers on their supplier’s standard tariff will be lower by £84 a year and will reach the annual lowest level on average of £1,042, from the previous £1,126.
The regulator has also lowered the level of the cap for prepayment meter customers who will save £95, from £1,164 to £1,070 per year.
These price cuts are attributed to a sharp decrease in wholesale gas prices as the Covid-19 pandemic has squeezed energy demand.
Ofgem has also recommended the price cap to remain in place for next year to ensure households continue to pay a fair price for their energy.
However, it warns if wholesale energy prices continue to rise in the coming months, the cap is likely to rise in April to reflect these higher costs.
Ofgem has also decided to roll the prepayment meter cap into the default tariff price cap to protect these households as the existing prepayment meter cap expires at the end of this year.
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.”