Energy bills will fall by 7% in July – the first drop for a year, energy regulator Ofgem has announced.

It means a household using a typical amount of gas and electricity will see their annual bill fall by £129.

The regulator’s price cap, which is set every three months, sets a maximum that suppliers can charge for each unit of energy, affecting 22 million households in England, Scotland and Wales.

Charities say cheaper bills are welcome but many people still struggle to pay, with millions of customers collectively owing about £4bn to suppliers.

The price cap does not apply in Northern Ireland, which has its own energy market.

Tim Jarvis, director general of markets at Ofgem, said the drop in energy bills reflected a fall in the international price of wholesale gas.

“However, we’re acutely aware that prices remain high, and some continue to struggle with the cost of energy,” he added.

The fall comes at the warmest time of the year, when energy use is lower, but analysts expect little change in prices in October.

Although the cap changes every three months, the regulator illustrates the effect of this with the annual bill for a household using a typical amount of gas and electricity.

This typical household is assumed to use 11,500 kWh of gas and 2,700 kWh of electricity a year with a single bill for gas and electricity, settled by direct debit.

The 7% fall would mean a typical annual bill for a dual-fuel customer paying by direct debit would cost £1,720, down from the current level of £1,849.

It would also more than reverse the £111 increase under the current price cap, which came into force at the start of April.

Customers can also estimate their own potential saving by knocking 7% off their monthly direct debit.

However, prices would still be higher than a year earlier, and significantly above levels seen at the start of the decade.

High bills in recent years have also led to ballooning levels of customer debt to suppliers, with just under £4bn owed.

Ofgem has pointed to cheaper options available for households willing to switch to a fixed deal, although customers who are saddled with debt may not be allowed to switch.

The price cap announcement comes just two days after Prime Minister Sir Keir Starmer signalled a partial U-turn on cuts to winter fuel payments.

More than 10 million pensioners lost out on the payments, worth up to £300 when the top-up became means-tested last year.

However, Sir Keir said on Wednesday that the government wanted “more pensioners” to be eligible again.

It remains unclear how many will regain their entitlement for the payments, how that will be achieved, or when the changes will take effect.