Millions of households in the UK are set to have their energy bills lowered as the regulator reduces the caps on electricity and gas charges.
Ofgem said on Friday it was cutting the price that suppliers can charge for gas from 6.9p per kilowatt hour (kWh) today to 6.89p from the beginning of October.
The price of electricity will fall from 30.1p per kWh to 27.35p, Ofgem said.
As a result, the regulator estimated the average household bill will now be around £1,923 a year, down from £2,074 per year previously.
However, actual bills depend on how much energy a household uses, because the caps are placed on unit costs.
"It is welcome news that the price cap continues to fall, however, we know people are struggling with the wider cost of living challenges and I can't offer any certainty that things will ease this winter," said Jonathan Brearley, chief executive of Ofgem.
The 7 per cent fall in the cap reflects further falls in wholesale energy prices as the market stabilises and suppliers return to a healthier financial position after four years of losses, Ofgem said.
The price cap will be the lowest since March 2022, but it will still be 50 per cent higher than it was two years ago.
Andrew Bowie, a minister in the Department of Energy and Net Zero, said the lowering of the price caps was "incredibly heartening".
"I think people will welcome the fact that average energy bills will now be lower than at any point since early 2022," he told the BBC.
"So, this is a positive day, we're moving in the right direction and I think that we should welcome it."
However, the Labour opposition's shadow climate change secretary Ed Miliband said the "cost-of-living crisis is still raging for millions of people."
"Higher energy bills are unfortunately here to stay under the Conservatives, even with this fall, bills are significantly higher than they were only three years ago," he said.
"The problem is the Tories have learnt no lessons from this crisis. They continue to side with the oil and gas companies making record profits over hard-working British families, with their refusal to fix the gaping loopholes in the windfall tax or make the sprint we need for clean power, keeping the onshore wind ban and failing to insulate homes."
The cost of keeping warm
Bills are expected to rise once again in January, which could wipe out the gains made by the lowering of the price cap.
Analysts at Cornwall Insight predict that bills will remain around their current levels until at least October 2024.
As such, the charity National Energy Action (NEA) has warned that 6.3 million UK households could be trapped in fuel poverty this winter. The number is slightly down on last year, but significantly above the 4.5 million in October 2021.
"The price cap does not protect those who simply cannot afford the cost of keeping warm," said NEA chief executive Adam Scorer.
"The UK government can still act – by directly reducing energy bills via targeted energy discounts or a more targeted Energy Price Guarantee for low-income and vulnerable households.
"It knows how to do it. It has millions of pounds unspent from previous schemes. It is aware that failing to act will consign millions to another winter of despair and suffering."
Meanwhile, there have been calls for the government to put more money in home insulation programmes to help households conserve energy and lower bills.
"Even with a lower price cap, bills are still higher than before the energy crisis and are likely to remain high for the future," said Adrian Ramsay, co-leader of the Green Party.
"Figures released earlier this week suggested that almost half of all British households – 13 million homes – said they did not turn on their heating when it got cold last winter.
"The average home could save hundreds of pounds a year with decent insulation and the government needs to support councils to reach them as soon as possible."