From July, energy costs for the majority of households across the United Kingdom will see a decrease of 7%, bringing the typical annual bill down to £1,720.

The energy regulator, Ofgem, announced that the price cap which governs standard gas and electricity rates will be reduced by £129 annually for an average household, due to a drop in wholesale energy prices.

Concerns regarding the global economic situation, exacerbated by tariff increases from President Trump and unseasonably warm spring weather, have played a pivotal role in driving down gas prices recently, despite a minor rise observed this month.

Ofgem reported that 90% of this reduction is attributed to lower wholesale prices, with the remaining 10% derived from adjustments in how suppliers calculate their operational charges.

This upcoming decrease will offset a previous rise of 6.4% or £111 a year that was implemented in April, which had brought average bills up to £1,849.

The consulting firm Cornwall Insight anticipates that additional reductions to the price cap may occur in the next two quarters, but this will largely depend on external factors such as weather conditions, the ongoing conflict in Ukraine, and international trade developments.

Despite the reduction in July, energy bills will still exceed historical averages, with the forthcoming amount being £152 higher than at the same time last year.

Ofgem has encouraged consumers to explore various options for cheaper energy plans, as savings of up to £200 annually can be found for some households.

Currently, around 35% of households are on fixed tariff agreements, a significant rise from just 15% the previous year, reflecting increased availability of market offers.

Tim Jarvis, Ofgem’s Director General of Markets, remarked: “While the decrease in the price cap is positive for consumers and corresponds with a decline in the cost of wholesale gas, we acknowledge that overall prices are still high, and many individuals continue to face difficulties affording energy.”

He advised that consumers are not obligated to pay the price cap and should investigate better deals, suggesting that switching payment methods like direct debit can lead to savings of up to £136.

Dame Clare Moriarty, Chief Executive of Citizens Advice, noted that while the decline in energy prices may alleviate some financial pressure, it is essential to keep the broader context in mind: bills remain 52% higher than pre-energy crisis levels, with nearly seven million people in households struggling to keep up with payments.

She emphasized the necessity for the government to extend more targeted energy bill support to the most affected households and to enhance energy efficiency measures for five million homes.

Cornwall Insight has highlighted the pressing need to tackle the existing affordability crisis facing many households.

In light of accumulating energy debts, various suppliers have advocated for the establishment of a “social tariff” to assist those most in need. Energy debt has reached unprecedented levels due to ongoing high tariffs.

Jarvis reiterated that the regulator is committed to assisting consumers and implementing further changes aimed at supporting those in energy debt. Efforts include revising standing charge tariffs for the upcoming winter season.

Introduced in 2019, the cap serves as a measure to limit what energy suppliers can charge per unit of gas and electricity for customers on standard tariffs. It aims to protect consumers from being overcharged, particularly those who do not actively seek out fixed-rate deals, and is adjusted every three months based on Ofgem’s evaluation of the operational costs for an efficient energy supplier.

Consumer advocates continue to urge households to compare fixed deals that may lead to significant financial savings.