Liz Truss is expected to announce an energy bill freeze in the coming days, as well as a policy providing extra support to companies.
Currently, Ofgem’s household energy price cap is set to rise from £1,971 to £3,549 per year for the average household from October. A freeze could mean that the average household energy bill remains at current levels, skipping the 80 per cent rise.
However, a government source reportedly confirmed a suggestion in the Times that bills will be capped at £2,500 and the £400 will still be taken off.
READ MORE: Liz Truss set to freeze household energy bills - reports
It is not clear yet whether those on fixed tariffs will automatically be put on the price freeze or not.
In May, the government promised £400 payments to all households, and £1,200 to the most vulnerable. This is set to go ahead, but these measures were criticised as inadequate after Ofgem announced the October increase, and pressure has been building on Truss to bring further support for households.
The cost of the policy is thought to be around £90 billion and will come out of general taxation, rather than coming off energy bills. It is not clear yet when any support will arrive for members of the public, but the energy cap increase was set for October 1, so it is likely support will be aimed around that date.
Gas prices are predicted to remain high well into 2024, and likely even for longer than that, as Europe gets off cheap Russian gas, so it's unclear how long the freeze will last. Some reports have suggested the freeze will remain in place until the next general election in 2024.
Earlier reports suggested a slightly different plan. Bloomberg reported that ministers will set a new price per kilowatt hour of gas and electricity that households will pay. Energy suppliers will then buy gas and electricity at very high wholesale prices, and sell it to households for much less than it cost. They will fund that through bank loans, which will be guaranteed by the government. Added to the scrapping of green levies off energy bills this will freeze bills for families, although still at a record £1,971 per year for the average household, Bloomberg reported.
If either of these two main proposals are announced, it will mean that after the £400 rebate you will pay roughly the same amount as before if you are currently on your supplier’s standard variable tariff. Although as winter is coming bills are still likely to go up. For the average household that means an annual bill of around £2,000 – still almost double where prices were a year ago.
Speaking to the BBC before her Tory leadership victory, Truss said: "Before you have been elected as Prime Minister, you don’t have all the wherewithal to get the things done.
“This is why it will take a week to sort out the precise plans and make sure we are able to announce them. That is why I cannot go into details at this stage. It would be wrong."
Money saving expert Martin Lewis responded to the rumours on Twitter, saying: "Millions desperately need help. The planned 80% energy price cap rise set for 1 October in England, Scotland, and Wales is a catastrophe.
"Freezing the price cap now would help substantially. Yet we must accept that doing it this way may be expensive for the public finances.
"We are freezing at the current level, but that is already high. If we freeze now, we already have seen the price cap rise 50%, so we're freezing at a higher level than some other countries have."
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