(Bloomberg) -- UK energy bills are set to fall to the lowest level in two years as wholesale prices continue to decline rapidly.

The price cap will drop 12% to £1,690 from April 1, according to figures published by regulator Ofgem on Friday. The pricing mechanism, set on a quarterly basis, limits how much suppliers can charge per unit of energy.   

Analysts expect bills to slide further in July, helping to ease inflation and providing relief to consumers.

Wholesale gas and power prices have dropped rapidly in recent months as mild weather and low demand ease pressure on global supplies. A fall in bills in April could help to drive inflation below 2%, compared with 4% in January, according to Bloomberg Economics. That would be a welcome shift for the Conservative party, with the possibility of general election looming in the coming months.   

Still, consumer bills are more than a quarter higher than they were before Russia invaded Ukraine two years ago, according to The Resolution Foundation. Roughly 3 million households are in debt to their supplier, say consumer groups, who have called for the Treasury to do more in the upcoming budget to help the lowest income homes.

Prices are expected to drop again in July, followed by a moderate increase in October, according to estimates from energy consultancy Cornwall Insight Ltd. This puts bills on track to fall by 24% or £545 in 2024, compared to last year, The Resolution Foundation said.

“Affordability remains the most significant issue, as people continue to struggle with bills over the last two years, which has led to record levels of energy debt,” Ofgem said in a statement. 

The regulator will allow suppliers to add £28 per year to bills to make up for bad debt losses from customers who haven’t paid. 

The government said on Friday it will examine how standard energy deals should pass on the cheapest electricity costs to consumers as prices drop.

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