Money Saving Expert Martin Lewis has broken down how Liz Truss' new energy price cap freeze will affect people.
The new prime minister announced today (8 September) that the government would stop on the rise in energy bills from next month, in an effort to combat the cost of living crisis.
Originally, the energy price cap was expected to rise by 80 per cent, from £1,971 to £3,549, starting on 1 October - but Liz Truss has since assured the House of Commons that no household in the UK would pay more than £2,500 for the next two years.
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Truss, who was elected as prime minister on Tuesday, said today: "This Government is moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills, it will curb inflation and boost growth.
"This guarantee, which includes a temporary suspension of green levies, means that from 1 October a typical household will pay no more than £2,500 per year for each of the next two years while we get the energy market back on track.
"This will save a typical household £1,000 a year. It comes in addition to the £400 energy bills support scheme.
"This guarantee supersedes the Ofgem price cap and has been agreed with energy retailers."
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Now, Martin Lewis has broken down exactly what this will mean for households across the country.
Taking to Twitter to explain what this price freeze means, he wrote: "The new price guarantee starts 1 Oct, and for someone on typical use will be £2,500/yr and it will last for two years.
"The current price cap is £1,971/yr rate at typical use, and was due to rise to £3,549 (and likely £5,400 in January). It was £1,277/yr last winter.
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"This will be a cap on standing charges & unit rates, so use less you pay less, use more you pay more (I'll publish the rates when I have them). There is not total cap on what you pay, the typical rate is just a figure for illustration."
He continued: "The new lower price cap includes getting rid of the green levies.
"The £400 payment to all homes (paid as £66 a month over winter) will continue.
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"That will take the average payment to £2,100/yr 7. To estimate what you'll pay, over a year, multiply current costs by 6.5% (each £100 becomes £106.50) this includes the £400 discount (but not other payments).
"For those with lower than typical bills, the % increase will be lower, for higher users higher (as the £400 payment is flat regardless of use, so has a bigger proportionate reduction on lower usage).
"The £650 payments to those on many benefits will continue (half's already been paid).
"As will the £150 to those with disabilities and £300 to pensioners.
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"There's no announcement on whether these payments will be in place next winter, suspect the political reality is at least for benefits recipients, similar will be paid next year.
"VAT is not being reduced in this announcement, but there is a chance (50 – 50 I'd say) that may happen in the Chancellor's fiscal statement next week.
"For those on LPG and heating oil there I'm told there will be discretionary payments to help them too (awaiting details).
"For those in park homes and who pay landlords directly, I'm told they should benefit from the new business help (awaiting details).
"Those on fixes, can either stay on them, or can leave and switch to the new state subsidised tariffs with no exit penalties."
Ali Condon