Speaking in the House of Commons today, the prime minister said she was introducing ‘a new energy price guarantee’.
She also confirmed that the £400 payment for all households to help with energy bills would go ahead and people will get help through universal credit.
In a statement to MPs, the PM said, 'Earlier this week I promised I would deal with the soaring energy prices faced by families and businesses across the UK. And today I am delivering on that promise.
'This government is moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills, it will curb inflation and boost growth.
‘This guarantee, which includes a temporary suspension of green levies, means that from 1 October a typical household will pay no more than £2,500 per year for each of the next two years while we get the energy market back on track. This will save a typical household £1,000 a year. It comes in addition to the £400 energy bill support scheme. This guarantee supersedes the Ofgem price cap and has been agreed with energy retailers.’
She said the Government would secure the wholesale price for energy while putting in place measures ‘to tackle the root cause of high prices’.
The scheme will cover England, Scotland and Wales, with a similar scheme expected in Northern Ireland.
Truss also set out measures to help businesses.
Because businesses are not able to benefit from a price cap, the PM said that there would be a six-month guarantee for businesses on their energy bills, capped at the same price per unit that households will pay under the government's new plans. This will also apply to other non-domestic energy users, including charities and public sector organisations like schools.
The business secretary will carry out a review after three months, and this may be extended for certain industries and vulnerable businesses, she said.
The ‘energy price guarantee’ limits the price suppliers can charge customers for units of gas.
This takes account of temporarily removing green levies, worth around £150, from household bills. The guarantee will supersede the existing energy price cap.
In England, Scotland and Wales a price cap of £3,549 price cap had been due to come in October.
The Government is expected to borrow more than £100 billion to pay for the scheme. Truss said the chancellor Kwasi Kwarteng will set out details in a fiscal statement later this month.
Truss has dismissed calls for a windfall tax on energy companies to pay for the scheme, arguing that to do so would deter investment in business.
Labour – 'Who is going to pay?'
Responding to the announcement, Labour leader Keir Starmer said that the party had been calling for a price freeze over the summer, which had been dismissed as ‘handouts’, but ‘the PM had no choice’ but to act.
While he welcomed the action, he said ‘the real political question’ was 'who is going to pay?'
The Treasury has estimated that there would be £170 billion in windfall profits for energy producers over the next two years, which Starmer said the head of BP had called ‘a cash machine’ for his company.
Labour has been calling for a windfall tax since January, he said.
Starmer said it was ‘ridiculous’ to say that a windfall tax would deter investors and that the chief executive of BP has said he wouldn’t cancel investment.
Starmer said the ‘burden would fall on working people’. He said, ‘It’s a very simple question of whose side are you on? Working people are paying for the cost of living crisis.’