New U.K. Prime Minister Liz Truss will limit energy bill increases for all households for two years in an effort to prevent widespread hardship, the BBC reports.
A typical household energy bill will be capped at £2,500 ($2,900 USD) annually until 2024.
The support scheme could cost up to around $175 billion, but Truss refused to put a figure on it, saying “extraordinary times call for extraordinary measures.”
Businesses will get help, with prices capped for six months, a shorter period of protection than many had hoped for.
The help will be for everyone in England, Scotland, and Wales, with equivalent assistance for Northern Ireland.
But there are concerns the measures are not targeted enough, with no additional support for the most vulnerable. As a result, millions are still expected to be in fuel poverty this winter.
The energy price cap – the highest amount suppliers are allowed to charge households for every unit of energy they use – had been due to rise to $4,117 for a typical household from October.
To limit the amount customers’ bills go up by, the unit price will be capped, although household energy bills will vary according to how much gas and electricity they use.
The government will compensate energy firms for the difference between the wholesale price for gas and electricity they pay and the amount they can charge customers.
Commenting on what steps households should now take, Greg Jackson, chief executive and founder of Octopus Energy, said firms were still working through the details and customers should “sit tight and wait to hear from their energy supplier.”
“Nothing will change until 1 October, and we’ll be in touch with everyone before then.”
The dramatic state intervention will be funded by government borrowing, adding to the U.K.’s already large debt. The total cost of the support will depend on the cost of energy on the international energy markets, which can be volatile.
This comes after Truss rejected calls to extend a windfall tax on gas and oil company profits to pay for the package.
Labour leader Sir Keir Starmer said the refusal to fund it with a windfall tax showed she was “driven by dogma,” and “it’s working people who will pay for that.”
Liberal Democrat leader Ed Davey accused the government of bringing in a “phony freeze” while “refusing to properly tax the eye-watering profits of oil and gas companies.”
“This will still leave struggling families and pensioners facing impossible choices this winter as energy bills almost double,” he said.
Truss argued it was “the moment to be bold.”
“We are facing a global energy crisis, and there are no cost-free options,” she said.
Gas prices have soared this year, largely due to the conflict in Ukraine that has reduced supplies of Russian gas.
Experts and charities warned that without help with soaring energy bills, lives would have been at risk this winter, with people struggling to afford basic day-to-day living costs.
Citizens Advice chief executive Dame Clare Moriarty, told the BBC the package will provide “much-needed relief for millions” but said she was concerned it is not going to reverse the trends it was seeing. “We’re seeing problems turn up in the summer, which we would normally expect to be winter.”
Truss outlined plans “to make sure we have security of [energy] supply for the long-term”.
This includes issuing new oil and gas exploration licences for the North Sea and lifting the ban on fracking for shale gas “where there is local support for it.”
Downing Street said the price cap would boost economic growth and curb inflation by as much as 5%. The rate at which prices rise is currently at a 40-year high of 10.1%, largely driven by soaring energy prices.