Ofgem is lowering its energy price cap - the amount suppliers are able to charge - from the current ยฃ4,279 per year to ยฃ3,280 for the average household, effective from April 1, it has announced.
Energy suppliers may be exposed to around ยฃ1.9 billion in debt, much of which could be unrecoverable, as households struggle to pay soaring energy bills.
Rishi Sunak has been named leader of the Conservative Party following Liz Truss' resignation last week, and will take the reins at a turbulent time in British politics.
European Union leaders are struggling to find immediate practical solutions on how to deal with the energy crisis while avoiding an open rift between Germany and France.
The UK government has set out plans to cover half the expected rise in wholesale energy prices in a bid to soften the impact on businesses and non-domestic energy users.
Devolved governments in Scotland, Wales and Northern Ireland have urged the Chancellor not to pass the cost of an energy cap on to struggling families.
Nearly one in four adults plan never to turn their heating on this winter, polling suggests, as average bills are set to rocket while the temperature drops.
UK households will pay almost triple the price to heat their homes this winter compared with a year ago, a jarring increase for millions of people already struggling to afford everyday essentials.
Families face a grim winter as experts predict the cap on energy bills will hit close to ยฃ3,600 per year from October - before rising again next year.
Rishi Sunak has ruled out freezing the UKโs energy price cap if he becomes prime minister, while his rival Liz Truss warned against โthrowing moneyโ at a short-term fix for the looming winter bills crisis.
Nicola Sturgeon is to convene a summit between energy supply companies and consumer groups later in August to discuss what support can be offered to those struggling to pay soaring bills.
Ofgem has confirmed that the energy price cap will be updated quarterly, rather than every six months, as it warned that customers face a "very challenging winter ahead".
The Government must take urgent action and help the poorest households months before energy bills will rise again ahead of the winter months, the boss of a major energy company has said.
By Lyndsey Burton, managing director of Choose.co.uk
The upcoming Energy Security Strategy provides an opportunity for the Government to break the link between renewable tariffs and fossil fuels, boosting consumer confidence in renewable energy.
By Lyndsey Burton, managing director of Choose.co.uk
The decision by the UK energy regulator Ofgem to give themselves the ability to change the default energy price cap in the event of extraordinary circumstances raises questions about the future of the UK energy market and how effectively it works for smaller suppliers and customers.