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Will new PM Truss freeze the energy price cap?

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
07/09/2022

New Prime Minister Liz Truss has pledged to take action over soaring energy bills, with rumours of a price freeze on the way.

In her first statement in Downing Street as the new Prime Minister, Truss said: “I will deal hands-on with the energy crisis caused by Putin’s war.

“I will take action this week to deal with energy bills and to secure our future energy supply.”

Soon after, reports suggested she would freeze the energy price cap at £2,500, cutting average energy bills by around £1,000.

Last month, industry regulator Ofgem confirmed the energy price cap – which applies to approximately 24 million on default tariffs – would rise 80% from £1,971 currently to £3,549 on 1 October 2022.

What is the energy price cap and when could it be frozen?

The energy price cap is a limit on the unit rate and standing charge that energy suppliers can charge. But it’s important to understand it is not a limit on bills as the figure is calculated using average energy use in the typical home.

Following the Ofgem announcement, fears have grown that up to 28 million people could face fuel poverty this winter, with those on pre-payment meters having to find over £700 a month, according to analysis by leading think tank Resolution Foundation.

During her Conservative leadership campaign, Truss floated the idea of a utility price freeze while compensating energy companies with government funds or loans to be repaid over a number of years.

YourMoney.com contacted Number 10 to confirm whether an energy price freeze is imminent. It said there is no official confirmation, adding that Truss is expected to provide further details in due course. Based on reports, it is expected to be announced as early as Thursday.

Related: See YourMoney.com’s Seven ways to get help with energy bills this winter for more information.