The UK's new Prime Minister Liz Truss has hinted that she will freeze energy prices in a bid to tackle the crisis.
Ofgem has stated that from October 1, the energy price cap will rise by 80 percent from £1,971 to £3549, which sparked calls for urgent Government intervention. Ms Truss has said she will confirm what she plans to do about it on Thursday September 8.
There are suggestions that she will freeze the price cap to £2,500 - lower than what it is currently forecasted, but higher than it is currently. This comes after Scotland's First Minister Nicola Sturgeon announced yesterday that there will emergency legislation written into Scots Law, freezing rental rates and banning evictions until next year.
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However, the energy prices are set by Ofgem, a government regulator for the UK's energy. If Ms Truss' price freeze goes ahead, here's what it means for the average bill payer.
The price cap of £2,500 would be the average yearly bill for someone who pays Direct Debit. However if you use more energy, your bills will be higher and there is the £400 energy discount payment to be kept in mind too.
Those on prepayment meters often have a higher rate. Currently the price cap is £2,017 a year on typical use, but it's set to rise to £3,608 a year on 1 October - however depending on the details of the Prime Minister's plans, this could change.
What will this mean for energy bills?
Confirmation and full details of what Ms Truss plans to do about the energy crisis will become clear on Thursday, but if this £2,500 goes ahead, it means bills won't be as high as many of us feared.
Every household will also still receive the £400 energy discount and those most vulnerable will get an added £600 - in two instalments. The £400 discount is being given to every household in instalments each month from October.
This means these payments will, in theory, be more effective to the overall household bills if the cap is set at £2,500. MoneySavingExpert Martin Lewis has welcomed the notion of support from the Government, but has said that more targeted help is needed.
Writing on Twitter he said it would be a 'sigh of relief for many' and said: "Freezing the price cap now would help substantially. The big benefit, and problem, of this is (almost) everyone gets it.
"And those who gain the most from it in cash terms will be those with the highest bills (many, though not all, will be at higher income levels), so clearly it isn't targeted at helping those who need it most." Martin highlighted that those on fixed rate deals may not benefit from the price cap freezing.
Martin said: "So what happens? Will they automatically be put on the price freeze? If they are not automatically moved, will they be allowed to switch to the price freeze?"
He later added: "Have you applied to fix your energy bills in the last 14 days? If so you're within the cooling off period. As there are rumoured big changes coming [on Thursday], be prepared to cancel if you still can."
How will it be paid for?
There is still uncertainty as to how this 'freeze' will be paid for until full details are issued. The BBC reported that it would be paid back through an extra charge on energy bills over the next two decades. In response to this Lib Dem leader Sir Ed Davey that it “isn’t a freeze. It’s a loan.”
“What they’re saying is that families and pensioners should be paying this back for years to come. That’s just not right,” he told BBC Breakfast.
Later reports, including one confirmed by a government source, said the freeze would be paid through tax and not clawed back through energy bills. Ms Truss is expected to announce full details on Thursday.
Speaking during PMQ, she said: “I will make sure that in our energy plan we will help to support businesses and people with the immediate price crisis, as well as making sure there are long-term supplies available.
“I understand that people across our country are struggling with the cost of living and they are struggling with their energy bills.
“That is why I, as Prime Minister, will take immediate action to help people with the cost of their energy bills and I will be making an announcement to this House on that tomorrow and giving people certainty to make sure that they are able to get through this winter and be able to have the energy supplies and be able to afford it.”
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