The amount suppliers can charge households for energy has been cut by regulator Ofgem but bills will still rise in April as government support is set to ease.
Ofgem’s announcement itself does not directly affect what customers will pay for gas and electricity but it reduces the costs faced by the government.
The typical annual household energy bill is set to rise from £2,100 to £3,000 in April because government help – known as the Energy Price Guarantee (EPG) – will become less generous and a £400 winter discount on all bills ends.
The government currently compensates energy suppliers with the difference between the guarantee and Ofgem’s cap.
The energy price cap was £4,279 in January but on Monday, Ofgem announced that the cap will drop to £3,280 in April because of falling wholesale prices.
Emily Fry, Economist at think tank the Resolution Foundation, said: ‘While consumers won’t have to face typical bills of £3,280 this spring, many are still set to see bills rise by a fifth as government support is scaled back.’