Energy Price Guarantee sees energy prices frozen at £2,500 for two years

The news comes as a result of a need to support households struggling with the rapid increase in energy bills over the past year. The price cap announcement last week had stated that the cap would rise to £3,549 per year for average use households paying by direct debit.

The Energy Price Guarantee will be implemented automatically by suppliers, who will be fully compensated, though details of how the scheme will ultimately be paid for have not yet been released.

Justina Miltienyte, head of policy at Uswitch.com, comments: “After endless reports of ever-increasing price predictions, consumers will be breathing a sigh of relief. Finally there’s a plan that removes the uncertainty of quarterly price increases and goes some way towards giving people the reassurances they need to get through the winter.

"But amid the solace, it’s important to remember that we are not out of the woods yet. Even if rates are not as high as they were going to be, households will still be facing an extremely difficult winter.

"Taking into account the £400 energy bill support, households could pay on average £237 more for energy over the three coldest months than they did last year - on top of hikes across other essentials such as food and fuel.

“It’s important to remember that bills are not frozen. This is a cap on the unit rate of the energy you use - it is not a cap on your final bill. The less energy you use, the less you will pay, so you may still be able to save money by managing your energy usage this winter.

“This help, while much-needed, is unaffordable to sustain. The longer we have to rely on Government support to keep prices down, the higher the final bill will be for taxpayers for years, if not decades, to come.

“With the pressure lifted for this winter, we welcome the announcement of an energy supply task force that must now sort out the structural problems of the wholesale energy market and how it interacts with the blunt price cap mechanism.

“Reforming the wholesale market goes hand-in-hand with reducing our dependence on non-renewable energy. Electricity prices can no longer be dictated by fossil fuels, especially gas, and it’s good to see a commitment to more quickly let customers benefit from the lower prices generated by renewables.

“Removing gas dependency would also protect households from a repeat of the most aggressive price shocks.

“The Government has made a start towards tackling the energy crisis, but now needs to work out how to make sure this never happens again.”