How much will my home's energy bill cost as Truss caps price at £2,500 for next two years?

Liz Truss has frozen energy bills at £2,500. Credit: PA

Liz Truss has set out plans to tackle soaring energy bills for households and businesses on Thursday.

The new prime minister announced that bills will be capped at £2,500 to help ease the burden on families.

It means bills will be significantly higher than last year's - but less than the amount they would have risen to had consumers been forced to meet the costs of the Ofgem energy cap change on October 1, when bills were set to rise 80% to £3,549.

So, what does this latest announcement mean for your household's or business's energy bills this autumn and winter?

How much will I now pay for my gas and electricity?

Under Ms Truss's new 'energy price guarantee' a typical household will pay no more than £2,500 a year on their energy for the next two years from October 1. The plan will limit the price suppliers can charge customers for the energy they use and effectively freeze households' bills, overriding Ofgem's existing energy price cap that was due to come into force at the beginning of next month. The prime minister also announced the removal of the green levy, which will knock a further £150 off household bills. The government said the package will save the average household about £1,000 based on current energy prices.

With the £400 discount on bills that many are set to receive this winter, the average household bill will be £2,100. It's important to note, the price is not a cap on the total you pay - this figure is just an illustration - if you use more energy, you'll pay more.

Will I still get the promised discount on my energy bills and cost of living support?

Yes. All this will come on top of the already announced £400 energy bill discount (paid at £66 a month over winter) most people will start receiving from October.

This will take the average payment to £2,100 a year. All other cost of living support packages set out under Ms Truss's predecessor, Boris Johnson, will remain, including the £650 payments promised to more than a million low income households or people in receipt of universal credit (half of which has already gone into people's bank accounts), the £150 promised to people with disabilities and the £300 payable to pensioners.

How long will it last?

The guarantee will be in place for two years from October 1.

What about those not on the main grid? Those living off main gas or electricity will receive support through a fund. No further details were given. The government will set up a fund for those using heating oil, living in park homes or those on heat networks so that all UK consumers can benefit from "equivalent support", Ms Truss said Who will fund it?

The package of measures will be initially funded by the government, although there are plans in place to reduce the burden of the cost, including an 'energy markets financing scheme', details of which will be published at the end of October.

Former vaccine roll out chief, Madelaine McTernan, will head up a new energy supply taskforce who will lead negotiations with domestic and international suppliers, as well as renewable producers, to reduce the price they charge for energy.

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What happens if you're on a fixed deal?

Up to 15% of households are on fixed tariffs, many locked in at higher prices than the current cap amid previous dire predictions that it could rise to as high as £7,263 next year.

Many of these customers will now find themselves paying a far higher rate for their energy than if they had remained on a standard variable tariff.

Questions remain as to whether these customers will be allowed to switch to the new guarantee, and if early exit fees – which can exceed £300 – will remain in force.

For those who have fixed recently, it is worth immediately checking when the “cooling-off” period ends to allow for a possible penalty-free exit.

What happens if you are on a pre-payment meter?

Relief will apply to those on a pre-payment meter, who are generally more likely to be in vulnerable circumstances than those paying by other means.

The rates at which prepayment meter customers are charged are slightly higher than for those paying via direct debit, and should they run out of credit they are not able to use any gas or electricity.

What happens to the January price cap?

Energy regulator Ofgem has said it will continue to announce the cap on household energy prices, despite the Government saying it would guarantee lower bills for customers.

Ofgem said that it plans to still make the announcements every three months, as it continues to regulate how much energy suppliers can charge for their services.

Suppliers will then submit part of their regulated bill to each household, and the remainder to the Government.

In effect the price cap then becomes a cap which limits how much the Government will need to pay, rather than the amount that households must pay.

The cap is quoted in the form of the average annual household bill. Currently, it is £1,971, and was set to rise to £3,549 in October.

Instead, Ms Truss is to effectively freeze the cap at £2,500 – saving households more than £1,000.

What about businesses?

Many businesses face grave risk as they are not covered by an energy price cap, and face sky-high bills this autumn.

The prospect of soaring bills has put strain on businesses, who have warned the government of the prospect of energy cost pressures wiping out thousands of jobs and livelihoods. Ms Truss announced a a six-month scheme will offer equivalent support for businesses and other non-domestic users such as schools and hospitals. After that there will be ongoing support for the most vulnerable industries, with a review in three months' time to decide where the help should be targeted.

How exactly that support will work is yet to be fully detailed by the government.

What support will be available for hospitals, schools and libraries?

Ms Truss had earlier announced that businesses will be spared crippling increases.

That assurance was also being offered to non-domestic energy users such as schools and hospitals, which have not been covered by the existing price cap.

A six-month scheme will offer equivalent support, Ms Truss said.

This element of the plan has also yet to be fully detailed.

What will happen in Northern Ireland?

Northern Ireland households will receive the same level of support on energy bills as those in the rest of the UK, the government has pledged.

Prime Minister Liz Truss said an "energy price guarantee" will be introduced on 1 October to help tackle escalating costs in a much-awaited announcement.

In a statement, Secretary of State for Business, Energy and Industrial Strategy Jacob Rees-Mogg said: "The new guarantee will apply to households in Great Britain, with the same level of support made available to households in Northern Ireland."

The new guarantee will discount the unit cost for gas and electricity use.

Mr Rees-Mogg says it will save the typical household £1,000 a year, and comes in addition to the £400 Energy Bill Support Scheme.