Energy bills have fallen by £426 a year on average as the new Ofgem price cap kicks in.
The price cap has fallen from £3,280 to £2,074 a year as of July 1, for someone with typical use, paying by direct debit.
But households have not seen their gas and electricity prices be based on the price cap since October last year.
Energy bills were previously dictated by the Energy Price Guarantee, which is set at £2,500 a year for the average home.
This means the difference between the Energy Price Guarantee and the Ofgem price cap is £426 - or roughly 17%.
The Energy Price Guarantee was introduced by the Government in October to protect households from soaring energy bills under the price cap.
At its highest point, the price cap reached £4,279 a year - but now wholesale prices have dropped, it can be reintroduced.
The price cap limits what you pay for each unit of gas and electricity you use, plus the maximum daily standing charge.
You’ll be on the price cap if you’re on a standard variable rate (SVR) tariff - this is roughly around 29 million households.
If you pay by direct debit, the average unit rate for gas has fallen from 10.31p per kilowatt hour (kWh) to 7.51p. For electricity, the unit rate has dropped from 33.21p per kilowatt to 30.11p.
The standing charge - a fixed daily amount you have to pay for energy, no matter how much you use - for both gas and electricity remains at 29.11p per day.
It’s important to note there isn’t a total cap on how much you can pay for energy - the headline figures illustrate what someone with typical usage is likely to pay over a year.
You can end up paying more or less, depending on how much energy you use - as well as how you pay your bill.
If you’re a prepayment customer, the price cap is falling to £2,046 a year and for those who pay on receipt of bill, the price cap is now £2,211.
The unit rates are slightly different for these methods of paying.
While it’s good news the price cap is falling, MoneySavingExpert.com founder Martin Lewis has previously explained how most people will still pay more compared to winter.
This is because the £400 energy discount - which was split into six payments worth £66 or £67 - stopped in April.
Writing in an MSE blog post, Martin said: “Apart from for those with high use, the drop in the rates doesn't make up for the £66 per month state support people got until April – and most are on monthly direct debit, which means they pay the same in summer as winter.
“Overall, this still leaves people paying double or more what they did before the energy crisis hit in October 2021.”
If you’re worried about paying your energy bill, check out all the ways you can get help here.
How much will my energy bill fall by?
The Mirror has created an energy calculator to give you a rough estimate of how much your energy bill will drop by today.
This tool is designed for those on SVR tariffs, which are covered by the price cap - it doesn’t include fixed deals or Economy 7/10.
Simply enter how much you currently pay for gas and electricity to get a new figure.
We’ve used average unit rates for dual-fuel customers - but in reality, there are regional rates and charges, which means this won’t be 100% accurate.
It should, however, give you a good idea of how your bill is changing.
Keep in mind the Ofgem price cap will be updated again in October.
