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Liz Truss has unveiled plans to borrow vast sums of money in order to cap annual household energy bills at 拢2,500 for the next two years, declaring 鈥渢his is the time to be bold鈥�.

The new prime minister鈥檚 plans are expected to cost up to 拢150bn, more than double the cost of the 拢70bn furlough scheme, and will save households more than 拢1,000 a year on their energy bill.

Businesses, charities and public sector organisations will be offered an 鈥渆quivalent guarantee鈥� over the next six months to help with their energy costs this winter, Truss said.

After this period, targeted support will be provided to vulnerable sectors which will be identified in a review due to be carried out within the next three months by business secretary Jacob Rees Mogg.

In the meantime, Truss said that 鈥渃ompanies with wherewithal need to be looking for ways they can improve energy efficiency and increase direct energy generation鈥�.

The prime minister is also lifting the ban on fracking and will hand out more than 100 new oil and gas drilling licences in the North Sea as part of an effort to ramp up the UK鈥檚 domestic energy supplies.

Truss also unveiled a new target for the UK to become net energy exporter by 2040, and said Rees Mogg would set out a plan in the next two months which would outline how this could be achieved.

The government鈥檚 price guarantee comes in addition to the energy support scheme drawn up by former chancellor Rishi Sunak which will see households handed 拢400 in instalments over the next six months to help with fuel costs over winter.

The plans come as households brace for a rise of annual energy bills to around 拢3,500 next month from the current cap of 拢1,971 because of an international shortage of fuel due to Russia鈥檚 invasion of Ukraine.

Wearing a badge showing the Ukraine flag flying next to the Union Jack, Truss said in parliament today as she announced the plans: 鈥淭his is the moment to be bold. We are facing a global energy crisis, and there are no cost free options.鈥�

She added that the government are 鈥渢ackling the root causes of high prices so we are never in the same position again鈥�.

But the plans, which will include a temporary suspension of green levies on energy - taxes which are used to fund renewable energy initiatives - were criticised for supporting the use of fossil fuels.

Green Party MP Caroline Lucas said the measures would 鈥渓ock us into further dependence on fossil fuels鈥�, adding that the crisis over rising fuel costs had fundamentally been caused by dependence on gas. 

鈥淚t won鈥檛 be solved by extracting more gas and it certainly won鈥檛 be solved by a resumption of fracking, which would be a disaster for the climate,鈥� the Brighton MP said.

She also called for a retrofit 鈥渞evolution鈥� and lowering bills by investing in home insulation and renewable energy upgrades.

Reaction in the construction industry was mixed, with Builders Merchants Federation chief executive John Newcomb saying the trade body was pleased Truss had acted quickly to protect consumers from escalating energy costs but disappointed that support for businesses was only guarenteed for six months.

鈥淭he extreme price volatility in the wholesale market over the summer has seen some firms experience electricity costs fluctuating by up to 300% on a day-to-day basis,鈥� Newcomb said.

鈥淭his situation is likely to be exacerbated by Russia鈥檚 indefinite closure of the Nord Stream 1 pipeline to Germany, and energy-intensive manufacturing businesses need the certainty provided by a longer-term support package.鈥�

He also echoed Lucas鈥� calls for home energy efficiency-improving retrofits, saying there was an urgent need for Truss to 鈥漸nderstand the enormity of the capacity and capability of the workforce needed as part of a National Retrofit Strategy to decarbonise buildings and electrify heating鈥�.

Ian McDermott, chief executive of housing association Peabody, said that while the government鈥檚 plans would make 鈥渟ome difference鈥� to energy bills, more needed to be done to tackle the 鈥渋njustices鈥� face by people on low incomes.

鈥淥ur customers were worried about the cost of energy long before the current crisis, with many already making the stark choice between heating and eating,鈥� he said.

鈥淲ith more than one in 10 people saying they have borrowed from short-term high-interest lenders to pay their energy bills; I am extremely concerned about rising debt and the impact this will have on people鈥檚 mental and physical wellbeing.鈥�

Dan Brooks, director at developer Moda Living, welcomed the measures but urged Truss to lower bills by focusing on accelerating the development of UK-based renewable energy sources.

He said: 鈥滻nflated gas prices driving up costs across the country while the biggest players line their pockets with huge profits is outrageous and nonsensical.

鈥淭o resolve this issue for the long term we urgently need an accessible priced, renewable network of energy that protects the planet from damage and its people from hugely inflated energy costs.鈥�

UK gas producers and electricity suppliers could make excess profits of as much as 拢170bn over the next two years, according to Treasury estimates.

But Truss has ruled out placing a 鈥榳indfall鈥� tax on energy companies, saying the move would discourage the investment needed to secure homegrown energy supplies.