Liz Truss will freeze energy bills at an average of £2,500 per year, funded by borrowing. The prime minister announces a £150 billion plan and the resumption of fracking as part of her pledge to address the crisis’ root causes.

The government will increase borrowing to fund the plan to reduce the unit energy cost. According to Whitehall sources, estimates will not be available until the chancellor’s fiscal statement, which is expected to be released later this month.

The so-called energy price guarantee will restrict how much gas suppliers can charge customers. Truss will temporarily remove green levies amounting to approximately £150 per household per year. 

Her plan will encompass England, Scotland, and Wales, but a similar initiative is anticipated in Northern Ireland.

Truss also announced initiatives that she said would increase energy resilience, including issuing approximately 100 new oil and gas licences, lifting the ban on fracking for shale gas, and accelerating new sources of energy supply, such as nuclear, wind, and solar.

The prime minister stated that beginning in October, the average household will save an additional £1,000 due to the price reduction, which is in addition to the £400 discount previously announced by Boris Johnson. Truss told the House of Commons, “I promised earlier this week to address the towering energy prices dreaded by families and businesses across the United Kingdom.” “Today, I am fulfilling that promise.”

She stated, “This government is moving swiftly to implement a new energy price guarantee that will provide consumers with certainty regarding their energy bills, curb inflation, and stimulate economic growth.” “This guarantee, which includes a temporary suspension of green levies, means that beginning October 1, the typical household should pay no more than £2,500 per year for the next two years while we restore order to the energy market.

This will save the average family £1,000 per year. It is in addition to the £400 energy bill assistance programme. This guarantee exceeds the Ofgem price cap and has been negotiated with energy suppliers.”

A six-month programme will provide “equivalent support” for businesses and public sector organisations such as schools and charities, with a three-month review to determine how it could be better targeted.

Labour’s Keir Starmer criticised the decision not to extend a windfall tax on energy suppliers’ unexpectedly high profits to fund the scheme partially. He stated, “The prime minister opposes windfall taxes.” “She wants to leave these enormous profits on the table, with one clear and obvious consequence: the working class will foot the bill.”

He also criticised the lack of action on home insulation and the emphasis on oil and gas, stating that “doubling down on fossil fuels is an absurd response to a fossil fuel crisis.”

Starmer stated, “I fear fracking and a gas rush in the North Sea will not reduce costs. Neither will they improve our energy security. However, they will derail our efforts to combat the impending climate crisis.

The decision to renew fracking will likely be controversial. The practice was discontinued in 2019 due to concerns about the magnitude of the resulting earthquakes. Thursday will see the release of a delayed British Geological Survey report on the impact of the practice, according to the government document outlining the energy plan.

The minister admits that lifting the ban on fracking is not a panacea.

Truss also announced a review of the government’s net-zero strategy in light of the “evolving economic environment.”  Environmental activists are likely to be alarmed by the review, but it will be chaired by Chris Skidmore, who chairs the net zero group of Conservative MPs and is a crucial proponent of meeting the targets.

Truss told the House of Commons that “decades of short-term thinking” had failed to secure energy supplies, a fact that the Russian invasion of Ukraine had exposed. “I’m taking immediate action to support people and businesses over the next two years, with a new energy price guarantee and addressing the root cause of the problem by increasing domestic energy supply.”

Under the programme, Truss promised that households that do not pay directly for mains gas and electricity, such as those living in park homes or on heat networks, would not be worse off and would receive personal support through a separate fund.

Businesses and public sector organisations were to be offered a new six-month “equivalent support” programme, which is expected to be an intervention to subsidise the wholesale price of gas, but few details were provided regarding this programme. Officials from the Treasury anticipate that the intervention will reduce predicted inflation by four to five percentage points, thereby reducing the cost of servicing debt.

The plan was presented to the House of Commons during a general debate, as opposed to a ministerial statement customary for such announcements. Before Truss spoke, the Speaker, Lindsay Hoyle, expressed his “extreme disappointment” that the MPs had not been provided with the plan’s details beforehand.