The energy price cap will be cut by regulator Ofgem, meaning the maximum amount suppliers can charge per unit will drop.
But average household bills are still set to rise by hundreds of pounds in April across England, Wales and Scotland.
So what’s going on?
What is the new energy price cap and how will it affect customers?
The price cap sets the maximum amount suppliers can charge per unit of gas and electricity, with standing charges taken into account.
It is not a cap on customers’ overall energy bills, which will still rise or fall in line with their energy consumption.
The regulator, Ofgem, says the average household can expect to pay £3,280 a year from 1 April on electricity and gas bills.
This is a decrease from the previous cap of £4,279, which was effective from the beginning of January to the end of March.
The energy cap being lowered reflects the fall in wholesale energy prices – but it doesn’t mean customers will be paying less, as bills are actually set to rise.
Why are energy bills rising?
Although the price cap is currently £4,279 a year, no one pays the full amount right now because the government’s Energy Price Guarantee (EPG) gives a discount off these rates to all households.
A household using a typical amount of gas and electricity in Great Britain is instead currently paying £2,500 a year on average because the government is covering the difference between this bill and the price cap.
But the EPG will become less generous from April, with bills set to rise by £500 to £3,000 a year for the average household, at the same time as the government’s £400 winter discount in Great Britain will also come to an end.
The charity National Energy Action (NEA) told FactCheck that households will therefore see an average annual rise of £900 because customers will have the £500 difference to pay as well as the £400 that the government will no longer be contributing.
Heidi Karjaleinen, from the Institute for Fiscal Studies (IFS), told FactCheck that lower income households in particular are “disproportionately affected” by high energy inflation because “energy represents a larger share of their overall spending”.
IFS calculations based on 2019/20 figures show that lowest income households typically spend 11 per cent of their total spending on gas and electricity, compared to 4 per cent for top income households.
A Department for Energy Security and Net Zero spokesperson said: “Government support will continue to help households with their energy bills.
“We know this is a difficult time for families, which is why the government has covered around half of the typical household’s energy bill this winter, and by the end of June the Energy Price Guarantee will have saved a typical household in Great Britain around £1,000 since it began in October. In the meantime, we’re committed to helping people with rising costs by reducing inflation and growing the economy.
“The cost of energy has already been falling and we expect this to drop further over the coming months, which we fully expect suppliers to pass onto their customers.”