Ofgem has set the final level of the price cap, following the regulator’s statutory consultation published on September 6, at £1137 per year for a typical dual fuel customer paying by direct debit.

When the price cap comes into force suppliers will have to cut the price of their default tariffs, including standard variable tariffs, to the level of or below the cap, forcing them to scrap excess charges.

The cap will save customers who use a typical amount of gas and electricity around £76 per year on average, with a typical customer on the most expensive tariffs saving £120.

The savings for individual customers will depend on how much energy they use, the price of their current tariff, whether they have both gas and electricity and how they pay for their energy. In total, the price cap will save consumers in Great Britain around £1 billion.

Households protected by the cap will be able to save even more money by shopping around for a better deal.

The price cap level will be updated in April and October every year to reflect the latest estimated costs of supplying electricity and gas, including wholesale energy costs. This will ensure that those protected always pay a fairer price for their energy.

Wholesale costs have risen significantly over the last year. If this trend continues, it is likely that in February Ofgem will announce an increase in the level of the cap to take effect in April. Customers can be confident that any increase in the cap would only reflect changes in the actual costs of providing the gas and electricity they use rather than supplier profiteering so that they will always pay a fair price for their energy.

Dermot Nolan, chief executive of Ofgem, said: “From 1 January, the energy price cap will put an end to customers on default tariffs being overcharged as much as £1 billion for their gas and electricity.

“The price cap will ensure that whether energy costs rise or fall suppliers are not feathering their nest and changes in energy prices will reflect the underlying costs to heat and light our homes.

“Consumers who want to cut their bills further should shop around for a better energy deal and while the cap is in place, we will continue our work to make this as easy as possible.”