Liz Truss is planning to cap energy bills for households and businesses at around £2,500 a year to help the UK cope with the cost of living crisis.
Government sources confirmed a report in The Times which said the move is expected to cost around £90 billion and would be paid for from general taxation and extra borrowing.
Energy bills for households are currently capped at £1,971 but are set to rise by 80 per cent to £3,549 from October 1.
Under the new prime minister’s plan, the cost of gas used for electricity and heating would be capped.
Once the £400 universal handout announced by Rishi Sunak in the spring to help with bills is added to the current cap, it brings the new upper limit to around £2,400 a year.
Energy firms will be asked to sign legally-binding agreements not to charge more than the new cap, with the government making up the difference between the amount they charge customers and the wholesale cost of buying gas.
Truss is expected to announce her plan later this week in her first big policy statement since taking over from Boris Johnson.
It is yet to be finalised how long the cap will be in place for, but it is expected to be at least a year.
Labour leader Keir Starmer has already called for the energy price cap to be kept at the current level.
But Truss has rejected Labour’s calls for the policy to be funded through a new windfall tax on energy firms’ huge profits.