Three million households are to see their energy bills fall by up to £19 a year as the regulator lowers a price cap aimed at protecting pre-payment customers.
The change, which comes into force on October 1, will see the average annual dual fuel bill for pre-payment customers cut from £1,067 to £1,048, Ofgem said.
The watchdog introduced a temporary safeguard tariff in April and will update it every six months based on the estimated cost of supplying energy.
It comes after British Gas last week said it will hike electricity prices by 12.5% for 3.1 million customers, a move condemned by the Government and branded a "slap in the face" for families.
British Gas was the last of the Big Six providers to increase prices after it promised in December last year to freeze tariffs until August, with its rivals opting to raise bills at the start of the year.
The safeguard tariff is aimed at protecting pre-payment meter customers - primarily those on poor- value standard variable tariffs - from paying too much for their energy.
It applies to households who pre-pay for their energy, mostly with traditional coin or token-operated pre-payment meters.
They are among those least able to benefit from competition and are more likely to be in vulnerable circumstances, Ofgem added.
The safeguard tariff is one of the Competition and Markets Authority's (CMA) remedies stemming from its two-year investigation into the energy market.