Around 15 million households will see their gas and electricity bills drop this winter after the energy watchdog cut price caps designed to protect those on poor-value deals.
Ofgem said the level of the price cap for default and standard variable tariffs (SVTs), which protects around 11 million customers, will fall by £75 to £1,179 from October 1 due to lower prices in wholesale energy markets.
The regulator added that the price cap for around four million pre-payment meter customers will also fall – by £25 to £1,217 a year from October 1.
It said wholesale energy costs had fallen “significantly” since February, when it last reviewed the price caps.
Ofgem chief executive Dermot Nolan said: “The price caps require suppliers to pass on any savings to customers when their cost to supply electricity and gas falls.
“This means the energy bills of around 15 million customers on default deals or pre-payment meters will fall this winter to reflect the reduction in cost of the wholesale energy.”
But Ofgem stressed households are still better off by switching away from default tariffs and SVTs to get the best deals in the market.
“Households can cut their bills further in time for winter, and we would encourage all customers to shop around to get themselves the best deal possible for their energy,” said Mr Nolan.
Energy and Clean Growth Minister Kwasi Kwarteng said: “Our action to ensure all consumers pay a fair price for their energy is putting money back in the pockets of up to 11 million households.
"The increased competition in the UK energy market facilitated by the energy price cap has enabled more suppliers than ever before to enter the market, driving the innovation and value that we all want to see.”
Anna Rossington, deputy director for Ofgem, said: "The price cap which protects consumers on default tariffs will reduce by £75 for this winter.
"That means 11 million households will see a reduction in their bills from October 1."
However Ms Rossington admitted those on pre-payment meters will not see the same level of reduction.
Those on pre-paid cards will see a reduction of around £25, even though some of the poorest and most vulnerable in society pay for their gas and electricity this way.
She said: "There are also vulnerable people who pay by different methods, like direct debit and standard credit, but I think it's important that everyone pays a fair price."
ITV News Consumer Editor Chris Choi asks: does the price cap fit?
Today’s price cap change is being presented as great news for consumers - but the details are not quite so rosey, ITV News Consumer Editor Chris Choi writes.
Although typical bills will come down £75 from October, bills will still be allowed to be higher than they were in January.
Those on pre-pay meters will only get a £25 reduction - yet they are often the least able to afford energy. It’s seems crazy they are losing out on the larger price cuts.
There is a danger people will be lulled into a view that they no longer need to switch away from old style tariffs (known as Standard Variable), but in fact there is still more than a £300 gap between the price cap level and the cheapest deals on the market.
Officials say wholesale prices have come down so bills need to follow - yet they are allowing energy firms to continue to charge current rates until October. Surely there should be pressure on firms to pass on these savings more quickly.
- How do I go about switching energy providers?
It pays to shop around, so use comparison sites, such as uSwitch, Compare the Market, MoneySupermarket, Energy Helpline or MoneySavingExpert.com.
Ofgem has a list of accredited comparison sites.
Before logging on, make sure you have to hand your postcode, the name of your current supplier and the name of your current tariff.
You can find your tariff and supplier details on a recent energy bill.
If you don't know your supplier (you've just moved home, for example), you can find out your gas supplier through this Ofgem link.
There are a number of new automatic switching companies that promise to constantly switch you to the cheapest deal on the market, if getting the cheapest deal, regardless of service is your main driver.