Households are set to discover their energy bills will drop by approximately 7% from April in a restructuring of costs after the Government pledged an average £150 reduction. Latest forecasts suggest Ofgem will lower the energy price cap by £117 to £1,641 annually for a typical dual fuel household from April 1 when it makes its announcement on Wednesday.

Chancellor Rachel Reeves announced in November that £150 would be slashed from the average household bill from April by abolishing the Energy Company Obligation (Eco) scheme introduced by the Tories whilst in government. Customers have been cautioned not to anticipate a straightforward £150 discount on their bills, as the reduction will vary depending on household size, type and energy consumption.

The decrease is expected to be primarily implemented through a lower price per unit of electricity consumed, with households urged to watch for information from their supplier clarifying this following the price cap announcement. Cornwall Insight stated the changes will reduce the cap by roughly £145 annually once VAT and pricing allowances within the cap methodology are factored in.

It noted that increases in charges linked to the operation and maintenance of Britain's energy networks have partially offset the savings. Wholesale prices had also risen marginally since its last forecast in December, with gas costs particularly volatile owing to "geopolitical factors".

Looking to the future, Cornwall stated that wholesale costs remain lower than when Ofgem established the January cap level. It anticipates the cap will stay "relatively steady" throughout 2026, with a "with only a small rise forecast in July".

Ned Hammond, deputy director of customer policy at Energy UK, which represents energy firms, said: "At a time when many households are struggling with their bills, action taken by the Government to provide a considerable discount on energy bills is hugely welcome. While the saving will be £150 for the average household, it is important to note that the discount is applied to the unit rate. Therefore, households will experience significantly different savings depending on their energy consumption, some much higher and others substantially lower than £150.

"In addition, other moving parts, such as network charges and wholesale costs, mean energy bills will not necessarily fall in line with the saving provided. Indeed, the price cap is projected to drop by around £115 from April 1."

Emily Seymour, energy editor at Which?, said: "Households can expect a significant cut to their energy bills in April, which will come as a relief to millions of people struggling with cost-of-living pressures. The bulk of this change is expected to be applied to your electricity price per unit, so your exact savings will depend on your usage; look out for communications from your energy provider in the coming weeks to see how it will affect your bills."

Simon Francis, co-ordinator of the End Fuel Poverty Coalition, encouraged households to pay attention to the alterations in unit costs and standing charges, instead of concentrating on the headline "average energy bill".

He said: "We know that energy bills can be confusing and trying to decide when to switch tariffs or change supplier is a big decision which can overwhelm people.

"As well as setting the price cap, Ofgem should play a greater role in ensuring that the tariffs reaching the market are fair and don't discriminate against specific customer groups. Sadly the responsibility currently falls to households to pay careful attention to any changes in their unit costs and standing charges."