Households could be saving up to £400 a year on their energy bills

Household budgets could get some much-needed relief as energy suppliers pass on a drop in wholesale gas costs.

The cheapest deals have fallen to a three-year low, with the cost of the 20 best-value tariffs averaging £799.20 a year.

This is down from £824.40 at the end of last month and £831.80 at the end of February.

However, many customers are paying much more as they remain on their supplier’s standard variable tariff.

Regulator Ofgem now caps the price of these and other so-called default tariffs. On April 1 the cap was lowered by the equivalent of £17 a year.

Some households are paying far too much in energy bills (REUTERS)

But it still means the average SVT customer is paying £1,162 a year for gas and electricity – £411 more than the cheapest deal on the market.

Peter Earl of comparethemarket.com, which carried out the research, said: “While it has taken some time for cheaper wholesale prices to filter downstream, the sustained period of lower prices has resulted in some very competitively priced tariffs.

"At a time when many households are worried about the cost of energy, this reduction may offer a way to reduce monthly outgoings.”