Prime Minister Liz Truss set out her first major policy intervention to address the soaring bills facing families and firms.
Energy bills for the average household will be frozen at no more than £2,500 and businesses will be spared crippling increases as Liz Truss took action to shield Britons from the global gas crisis.
The Prime Minister’s two-year plan will save the average household around £1,000 from October and protect billpayers from further expected rises over the coming months.
For businesses and other non-domestic users such as schools and hospitals, which have not been covered by the existing price cap, a six-month scheme will offer equivalent support.
After that there will be ongoing support for the most vulnerable industries, with a review in three months’ time to decide where the help should be targeted.
The plan will see the Government limit the price suppliers can charge customers for units of gas, replacing the existing price cap set by regulator Ofgem.
Using tens of billions of extra borrowing, the Government will provide energy suppliers with the difference between the new, lower price and what they would charge were this not in place.
The Prime Minister told MPs: “This is the moment to be bold. We are facing a global energy crisis and there are no cost-free options.”
Under the current domestic energy cap, households face average bills of £1,971 but this was set to rise to £3,549 in October – and forecasts have suggested it could hit as high as £7,700 by April 2023.
The £2,500 “energy price guarantee” will apply in England, Scotland and Wales from October 1, with the same level of support made available to Northern Ireland, which has a separate energy market.
The guarantee is based on the existing cap, plus the already promised £400 energy bills discount for all households, meaning costs will be similar to those faced today.
As expected, Ms Truss also ended England’s ban on fracking – the process of extracting shale gas by fracturing rocks with high-pressure water.
This could see domestic shale gas production begin in as little as six months, but will face heavy criticism from opponents who have long warned that fracking can cause earthquakes, water contamination, noise and traffic pollution.
She told MPs that fracking would only go ahead in areas where there was local support for it.
At a glance
The Government’s “energy price guarantee” will mean bills for the average household will go no higher than £2,500 at any point over the next two years.
The new help comes on top of the £400 energy bills discount in place for this winter, but the Government is not extending that to next year.
From 1 October, the average energy bill had been set to rise to £3,549 under the price cap review going as high as £7,700 by April.
It will save a typical home around £1,000 from 1 October, when the current consumer price cap had been set to soar.
• Business support
A scheme for businesses and other non-domestic energy users, such as schools and hospitals, will be given equivalent support for six months.
Details on how this will work – and for how long – are unspecified.
• The cost
The Prime Minister’s official spokesman has only said the cost of the support will be “tens of billions”. Previous estimates have put the strategy at around £150 billion.
A new energy supply task force, led by Madelaine McTernan, who headed the vaccine task force, will also negotiate with energy suppliers to agree long-term contracts that will reduce the price they charge.
• Green levies
The environmental charges on bills will be suspended temporarily for two years, with the move worth around £150 for household bills.
The cost of covering the measures will come from borrowing and general taxation.
• Oil heaters
Largely rural consumers with oil heaters do not benefit from a price cap. Ms Truss said a fund will be set up to give them “equivalent support”.
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