David Cameron has triggered "utter chaos" by announcing a new energy policy that appears to be the direct opposite of what his own energy secretary has argued for.

On Wednesday the prime minister made a surprise announcement that legislation would be introduced to force suppliers to give all customers the cheapest rates.

The plan also apparently caught his own Department for Energy off guard and Lib Dem secretary of state Ed Davey made no mention of the idea at a speech in London this morning.

Critics of the prime minister's plan point out that forcing energy companies to offer the lowest rate to all would take competition out of the market. However Davey told the CBI today that he wanted to see prices reduced by introducing more competition.

And Davey sidestepped questions about the apparent contradiction when pressed on it by the BBC.

"I've been working with the deputy prime minister and others, working with the energy companies, to try to drive more competition, to get them to agree that they will tell their customers what are the best available tariffs, so customers can save money," he said.

"These high energy prices are causing lots of problems and they are at the top of my list of priorities."

As Davey was dodging questions about the contradictory coalition announcement, Tory energy minister John Hayes was forced to perform "linguistic acrobatics" in the Commons to explain what was going on.

Asked whether he knew about Cameron's announcement in advance, he said: "Of course we understand what the prime minister was considering because we have been debating and discussing the provisions of the Energy Bill for months."

He added: "We will use the Energy Bill to get people lower tariffs and of course there are different options to be considered in the process."

Shadow energy secretary Caroline Flint said the prime minister's statement had thrown energy into confusion, adding: "It caused chaos in the energy industry and I have to say it left his own ministers at a loss as to what energy policy actually is."

She added: "For the Government to spend a day pretending they have a policy they have no intention of implementing is no way to run the country. It is like something out of The Thick of It."

Angela Eagle, the shadow leader of the Commons, said the prime minister had caused "utter chaos" by announcing policy "on the hoof" during prime minister's questions. "Government policy is now a shambles," she told MPs.

The PR disaster comes as Downing Street communications director Craig Oliver and director of strategy Andrew Cooper are out of the country picking up tips on campaigning in the United States.