Liz Truss is expected to announce plans to freeze energy bills at around £2,500 a year, but not to recover the cost through customers’ future bills, leaving the taxpayer to cover.
A general relief payment of £400 expected to be handed out to households this autumn will be factored in, so the energy price cap will effectively remain at the current level of around £1,971.
Tory sources confirmed wholesale gas prices could be capped, meaning the new prime minister’s plan will also help thousands of small businesses teetering on the brink of collapse.
The scheme, which could cost up to £90bn, will be paid for through additional borrowing, and Kwasi Kwarteng, who is expected to be the new chancellor, has previously made a case for some “fiscal easing”.
That suggests Truss has rejected major proposals from the Treasury Department and energy companies to freeze bills and add costs to customers’ bills for years to come. Critics warn that when energy companies make huge profits, it is difficult to justify them.
Energy bill prices are currently capped at £1,971 a year, rising to £3,549 as at 1 October. But the cap will be revised in January, with some analysts predicting it could exceed £5,000 a year.
A Truss campaign source said the new prime minister “understands” that people and small businesses are struggling and need help to get through a tough winter.
But they warned that those plans, which were expected to be unveiled on Thursday, could be delayed until next week, but are still being worked out.
Truss is also expected to announce a plan to address long-term energy security and supply concerns to ensure the UK does not end up in a similar situation every winter, instead of sticking plasters every year as the energy crisis continues.
Labour has called for a freeze on energy prices to pay for it through a windfall levy on oil and tax giants. But Truss has ruled out a windfall tax to cover the multi-billion-pound cost.
Another Conservative source said the Truss team had been “going around” with Treasury over the energy plan but was finally close to a deal. “She hasn’t made up her mind yet and different people are trying to include her in their plans,” they added.
