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Households could save up to £1,400, under Liz Truss' new plan. This will be a huge relief to struggling Britons this winter as the cost of living crisis continues to cripple everyone's finances.
The chart shows that a family living in a detached property on typical use would have paid £4,700 on energy bills under the October price cap. However, this will be frozen at £3,300 - a saving of £1,400.
A family who lives in a mid terrace property will save £950 a year under the new plans because the cap will be frozen at £2,350 instead of the £3,300 which it would have risen to on October 1.
While yesterday's announcement will provide welcome relief to millions of British households, some don't think it goes far enough.
Gareth Kloet, energy spokesperson for Go.Compare Energy, said yesterday: “Today’s announcement will undoubtedly provide some relief for bill payers across the UK - the eye-watering Price Cap increase – from £1,971 to £3,549 - that was due to come into force on October 1st was untenable and action needed to happen."
READ MORE: Energy price cap freeze - everything you need to know
Alice Haine, personal finance analyst at Bestinvest, the DIY investment platform and coaching service, welcomed the announcement.
She said: “Britons will be breathing a collective sigh of relief following Liz Truss’s decision to freeze annual energy bills at £2,500 for the typical household this winter and next.
"Households were bracing their finances for an 80 percent hike in their energy bills from October 1 with the more vulnerable resigning themselves to a long winter with little or no heating because they simply could not afford such an astronomical rise.
“While £2,500 is over £1,000 less than Ofgem’s energy price cap of £3549, set to come into force on October 1, it is still 23 percent more than the current level of £1,971."
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She continued: "However, with the £400 rebate on top, it means bills will remain around their current level – but that does not take away all the pain for consumers.
"Energy prices are still significantly higher than they were a year ago, with some households already struggling to absorb the rising costs and food prices are high too. It means household budgets are not completely out of the woods yet.
"Plus, it is also wise to remember the price cap is not a cap on the maximum bill a household can be charged as what you pay depends on your usage.
"This means that those using more energy than average will pay higher bills and those using less will pay less, so not everyone is looking at the same bills."
Go.Compare Energy recommends three things Britons can do to save money on energy bills:
"Take a meter reading on September 30 - Until October 1, energy costs per unit will still be in line with the previous price cap– so it’s absolutely worth taking a meter reading before these increases come into effect. By doing this, it simply means your energy company cannot charge you at the higher rate for any units that have been used prior to October 1.
"If you can afford to, increase your direct debit payments now – we still have a few weeks before the colder weather and darker nights set in so if you can, catch up on any arrears you may have with your energy provider, and make sure you are regularly providing meter readings so that your bills are up to date. Also, if you are lucky enough to have a balance in credit with your energy provider, try to keep it in the bank for your next bill increase.
"You could always think about implementing any energy efficiency advice that you may have previously been putting off. For example, can you replace any old windows and doors, make sure your boiler is serviced and flush radiator systems to improve efficiency."