Ofgem has announced the energy price cap will drop by more than £230 a year on average, marking the biggest drop in bills in two years.

The regulator confirmed the cap, which is the maximum amount supplier can charge per unit of gas and electricity, a fall of 12.3 per cent.

It said the annual price cap will fall to £1,690 for a typical dual-fuel household paying by direct debits from April 1, down from £1,928. If people use more energy than average, they would pay more.

Ofgem slashed the energy price cap to £3,280 a year from April 2023, before dropping to £1,834 a year from October to December 2023.

Ofgem has outlined the most recent changes to the energy price cap

While energy bills are forecast to drop throughout the year, experts are sounding the alarm that households could be slapped with extra penalties which could push costs up more.

Recently, Ofgem confirmed a new £16 charge per household to assist suppliers with recovering £3billion worth of debts resulting from the energy crisis.

Furthermore, the regulator is expected to introduce new levies to pay for the cost of prepayment meters, and adjustments to standing charges.

These changes come as the wider energy market has shrank significantly during the cost of living crisis with multiple suppliers going bust, including Bulb and Orbit Energy.

CEO of TotallyMoney Alastair Douglas warned households these events could be costly for households down the line.

He explained: “The price energy cap has become an energy price fix. Competition in the market is almost non-existent, and most tariffs set by providers are charging the maximum.

“And while new offers which undercut the cap are slowly entering the market, would-be customers are being slapped with £150 exit fees per fuel, pushing penalties up to an eye-watering £300.

“So while April’s cut to the price cap is a step in the right direction, Ofgem needs to step up and protect the people it’s supposed to serve. Otherwise, we’ll continue to see heating costs burning a hole in people's pockets, while energising big energy firm profits.”

Britons are used to seeing the price cap rise instead of coming down GETTY

Yesterday, Simon Francis, coordinator of the End Fuel Poverty Coalition Simon Francis echoed this sentiment.

Mr Francis added: “Even if Ofgem drops the energy price cap slightly as expected on Friday, energy prices will still be around 50 per cent higher than they were before the energy bills crisis began.

“Three years of staggering energy bills have placed an unbearable strain on household finances up and down the country. Household energy debt is at record levels, millions of people are living in cold damp homes and children are suffering in mouldy conditions.