UK PM Liz Truss Freezes Electricity Bills for Two Years

Prime Minister Liz Truss had been expected to announce that energy bills will be frozen as part of her plan to tackle the cost of living crisis driven by soaring gas and electricity prices.

UK Prime Minister Liz Truss has announced that energy bills will be capped at £2,500 a year from October 1. The PM said in Parliament the phased-in measure will last for two years, saving a typical household around £1,000 a year and help cope with soaring living costs, UK media reported.

Energy bills will be subsidised, maintaining the current price cap of £1,971 for a typical family. Taking into account former Chancellor Rishi Sunak’s £400 universal discount, the total cap will be £2,500.The universal discount will be applied on bills between October 2022 and March 2023.

“Earlier this week I promised I would deal with the soaring energy prices faced by families and businesses across the UK, and today I am delivering on that promise,” Truss told the Commons.

She added: “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.

The government will also temporarily remove green levies from household bills worth around £150 a year on average. A six-month scheme for businesses and public sector organisations is to offer "equivalent support" over the winter. While limited clarity was offered on this scheme, it is reportedly to be an intervention to subsidise the wholesale price of gas. As for households who do not pay directly for mains gas and electricity, they would receive personal support through a separate fund.

Energy suppliers will be offered government-backed loans allowing them to sell energy at around their current rate for the foreseeable future until 2024. The overall support scheme will cover England, Scotland and Wales, with similar measures anticipated in Northern Ireland.

The bailout, purportedly worth up to £150Bln (approximately $180Bln), would be funded through more government borrowing, Truss stated. MPs were told that the cost of the energy plan would not be revealed until after a fiscal statement from the chancellor, Kwasi Kwarteng, expected later this month.

"This is the moment to be bold. We are facing a global energy crisis and there are no cost-free options," Liz Truss told MPs in the Commons.

The opposition Labour Party had argued that a freeze on bills should be paid for through a windfall tax on the profits of oil and gas producers, but the proposal was dismissed by the PM.

Liz Truss stated in the House of Commons that “decades of short-term thinking” had failed to secure energy supplies.

Truss also announced schemes she touted as promising energy resilience, such as launching a new round of around 100 new oil and gas licences. She also revealed the government would lift the moratorium on fracking for shale gas. The controversial practice was stopped in 2019 amid concern about the earth tremors it caused. New sources of energy supply including nuclear, wind and solar, would also be accelerating.

The PM also underscored that under the “altered economic landscape” there would be a review of the government’s net zero strategy, led by Chris Skidmore, who chairs the net zero group of Conservative MPs.

The new proposals come after the UK energy regulator revealed on 26 August that the energy price cap would rise 80 percent to £3,549 per year for dual fuel for an average household from October 1, 2022. Some analysts have already speculated that sum could exceed £5,000 next year. Analysts had warned that without urgent government intervention, this sum could skyrocke t to £6,000 next year.

The costs of financing the support plan laid out by Liz Truss could be added to national debt, which is already above £3 trillion. According to cited UK Treasury officials, the announced measures could reduce predicted inflation by around four to five points, which, they maintain, would reduce the cost of servicing debt.

Opposition parties were quick to warn that the government's plan to ease the cost-of-living crisis without taxing energy companies would burden Britons with debt. Labour leader Sir Keir Starmer said the freeze would force taxpayers to “foot the bill”.

“This phony freeze will still leave struggling families and pensioners facing impossible choices this winter as energy bills almost double,” said the leader of the Liberal Democrats, Sir Ed Davey.

Liz Truss' phony freeze will see struggling families and pensioners with energy bills at double last winter's.

The Conservatives are choosing to allow this huge hike to people’s heating costs, while refusing to properly tax the eye-watering profits of oil and gas companies. pic.twitter.com/QSShCpVjkt

— Liberal Democrats (@LibDems) September 8, 2022