Wholesale energy prices have fallen fast in the past year, but bills have not, meaning households across Britain are overpaying on their energy, according to industry experts.

Costs have 'plummeted' since the start of last winter, according to data from ICIS Power Index (IPI), meaning there is now a huge contrast between the Government's price cap limit and how much customers are actually paying for energy.

Ofgem, the energy regulator, blamed the soaring wholesale costs as the reason it hiked up the energy price cap limit in April after it had been in place for just three months.

However, while wholesale costs were priced at £59.73 per megawatt hour at the beginning of this year, by the end of May, the average wholesale price was a lower £52.26 - a 12.5 per cent decrease.

Data: The wholesale cost of energy has significantly decreased over the last couple of months

The average cost in the six month period between 1 August 2018 and 31 January 2019, which is when April's energy price cap increase was determined, was also found by the IPI to be at £61.15 per megawatt hour.

This high cost of wholesale gas and electricity meant Ofgem put the energy default cap up by £117 - or 10 per cent - to £1,254 at the start of April.

Similarly, the pre-payment cap rose by £106 to £1,242 per year.

However, £61.15 per megawatt hour is a huge difference of 14.5 per cent when compared to the £52.26 suppliers were charged at the end of May - highlighting how much customers could be saving on their energy bills.

Despite the reduction in wholesale costs, standard variable tariff and pre-pay customers are continuing to pay at the limit of the price cap.

Now the wholesale costs, which account for over a third of the retail tariff caps, have gone back down by a significant amount, it is expected that the price cap should also be lowered when it is next reviewed.

The next reassessment will take place in August and will look at wholesale prices between 1 February and 31 July 2019 with a new cap to come into effect from 1 October.

Data from the Department of BEIS shows combined gas & electric bills have increased by £65

In the meantime, however, many customers are still being charged far in excess of the wholesale cost.

Data from the Department of Business, Energy and Industrial Strategy shows combined gas and electricity bills increased by £65 - 5.2 per cent - between 2017 and 2018.

Many of the major suppliers, including the Big Six, have been criticised for pricing their tariffs up to the limit of the price cap which means they are not passing down the savings they are making by paying less for wholesale energy.

Some smaller suppliers, however, have dropped their prices, for example, Igloo Energy who have cut its tariffs by 3.5 per cent today - its third price cut this year alone.

It initially cut its costs by 2.6 per cent before then dropping it by a further three per cent – with the overall price being slashed from £1,021.22 at the start of the year to £932.43 in June.

This data shows the rising and then falling cost of wholesale gas and electricity over past year

Rik Smith, energy expert at uSwitch, said: 'The cheapest fixed deal is now priced at £891 a year compared to £987 in January – a massive 10 per cent drop – making now the perfect time to switch.

'There's an incredible contrast between this and the current level of the cap at £1,254.

'It's worth pointing out though that even if a lower cap is more of a probability than a possibility, it will not make the cost of a standard variable tariff cheaper than the best fixed deal.'

However, Ofgem does take into consideration some potential changes in wholesale costs over the price cap time and calculates the tariff price cap based on a ‘6-2-12 semiannual’ rule to find a weighted average of wholesale energy costs.

Wholesale prices had initially risen in the summer months due to low levels of gas in storage.

However, the return of a healthy gas supply meant that wholesale costs dropped after prices collapsed from the start of the winter, as energy traders hurried to factor in unseasonably mild weather and stilted demand.

Wholesale energy prices are set to fall even further as we head into the warmest part of the year as demand for gas from domestic heating is greatly reduced.