Britain's new Prime Minister, Liz Truss, has presented radical interventions in the gas and electricity markets to keep costs under control for citizens and businesses.

With the "energy price guarantee", the energy bill of a typical private household will be frozen at £2,500 (€2,875) a year, the Prime Minister announced on Thursday in the House of Commons in London.

At the same time, she wants to issue new oil and gas production licenses in the North Sea and also allow fracking natural gas production on land.

In the short term, however, the price freeze is the decisive measure.

Philip Pickert

Business correspondent based in London.

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This will save each household around £1,000, Truss said.

Without the price freeze, Britain's government-regulated energy bills would have risen from £1,971 to £3,549 from October and, analysts estimate, would have jumped to more than £5,000 or even £6,000 next year.

"Extraordinary times require extraordinary measures," said the conservative prime minister about her current intervention.

The energy price freeze will dampen the inflation rate by around 5 percentage points and give economic growth a boost.

"Not enough help for families"

The “price guarantee” for private households is now to apply for two years – until the next election at the end of 2024.

"We're supporting the country this winter and next," Truss said.

For companies, energy bills will initially be frozen for six months.

Business associations reacted with relief.

"Businesses will welcome this pragmatic intervention to help firms struggling with skyrocketing energy costs," said Jonathan Geldart of the Institute of Directors.

The trade union federation TUC, however, criticized the aid package for the citizens as insufficient.

There is "too little help for families and too much profit for oil and gas giants".

Truss did not make any specific statements in Parliament about the costs of the measures.

Finance Minister Kwasi Kwarteng is due to present a calculation this month.

Internally, according to various media reports, there are already government estimates.

Economists are guessing up to £100 billion – which would correspond to around 4 percent of annual economic output.

According to a rough estimate by the government, it could even be as much as £150 billion, the Times wrote.

All estimates are subject to a great deal of uncertainty because they depend on the future development of the gas price.

Truss castigated "Putin's war" in Ukraine as the cause of the current problems.

The Russian President is using the price of gas as a weapon.

Anything but excess profit tax

Truss continues to vehemently reject the new special tax ("windfall tax") demanded by the Labor opposition on the high profits of oil and gas companies such as BP and Shell.

"That would harm the national interest because it would deter the very investments we need to secure more domestic energy sources," Truss said.

This point was the subject of the sharpest dispute in Parliament.

Labor leader Keir Starmer accused the Tory government of making working people pay for the price freeze instead of the energy companies.

The current crisis is a "cash machine" for energy suppliers.

Other Labor politicians have accused Truss of saying no to the new special tax "because of dogma and ideology".

Truss wants to strengthen the expansion of domestic energy sources, including the controversial extraction of shale gas using fracking.

This will make you less dependent on imports.

The moratorium on gas fracking, imposed by the Johnson administration in 2019 after several small earthquakes surrounding test wells, is being ended.

According to Truss, communities that allow fracking should participate financially.

According to the British Geological Survey, gigantic amounts of natural gas lie in the shale in some areas of northern England.

These could cover the country's needs for several years or even decades.

Funding could begin in as little as six months, Truss said in parliament.

Experts think that's overly optimistic.

The new conservative economy and energy secretary Jacob Rees-Mogg is a self-confessed fan of fracking.

100 new production licenses for oil and gas

Truss also wants to develop new oil and gas deposits in the British North Sea.

Up to 100 new licenses are to be issued for this in the near future.

She called these fossil fuels important transition technologies on the way to “net-zero emissions” by 2050.

British oil and gas production in the North Sea has fallen significantly since a peak around the turn of the millennium.

Oil production from British North Sea fields fell from 2.5 million barrels a day to less than a million barrels a day.

The gas curve also points downwards.

So far, British North Sea gas still covers about half of the UK's consumption.

The Truss government also wants to expand nuclear power and small nuclear reactors.

Apart from the energy price cap, Truss is planning tax cuts in particular, which will become more concrete in the next few days.

The relief measures will temporarily lead to significantly higher government deficits.