Ovo Energy says a drop in wholesale energy prices means it can lower bills to under £1,000 for households and small businesses.

The Bristol-based energy provider, which is a challenger to the big six energy companies, plans to pass on savings from a 9.5 per cent drop in costs.

In the UK, the average bill for gas and electricity combined is £1,264 per household.

Ovo’s £1,000 offer is based on a fixed deal paid with direct debit and covers medium energy requirements.

Ovo Energy’s managing director Stephen Fitzpatrick said: "Competition works. It is the best chance we have of bringing down bills, but we need a better market to make that possible."

"That means when wholesale prices fall, customers shouldn't see prices being frozen, they should see them falling,"

Last month one of the big six firms, SSE, said it would freeze its prices until 2016.