Liz Truss has announced a two-year freeze on the energy price cap.
With millions of households struggling to make ends meet, the government has confirmed a set of new measures to reduce bills over the coming months.
It was recently announced that the price cap was set to increase from £1,971 to £3,549 a year in October, which represents an 80 percent hike.
However, under Truss's new measures, no household will pay more than £2,500 on their energy bills over the next two years.
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During a session in the House of Commons, Truss said: "This Government is moving immediately to introduce a new energy price guarantee that will give people certainty on energy bills, it will curb inflation and boost growth.
"This guarantee, which includes a temporary suspension of green levies, means that from 1 October a typical household will pay no more than £2,500 per year for each of the next two years while we get the energy market back on track.
"This will save a typical household £1,000 a year. It comes in addition to the £400 energy bills support scheme.
"This guarantee supersedes the Ofgem price cap and has been agreed with energy retailers."
She went on: "We are supporting this country through this winter and next and tackling the root causes of high prices so we are never in the same position again.
"For those using heating oil, living in park homes, or those on heat networks, we will set up a fund so that all UK consumers can benefit from equivalent support."
The guarantee on energy costs, which is aimed at saving families and businesses from financial ruin if bills continue to rise as they have done over the past year, will be funded by increased borrowing after the PM rejected calls for a windfall tax on oil and gas producers.
Truss explained: "We will deliver this by securing the wholesale price for energy while putting in place long-term measures to secure future supplies at more affordable rates.
"This is the moment to be bold. We are facing a global energy crisis and there are no cost-free options."
She also said that support would be made available for all charities, businesses and public sector organisations for six months, with further help to be offered once that time had passed.
Speaking during her first session of Prime Minister's Questions yesterday (7 September), Truss said she was committed to supporting the country during this difficult period.
She said: "I will make sure that in our energy plan we will help to support businesses and people with the immediate price crisis, as well as making sure there are long-term supplies available.
"I understand that people across our country are struggling with the cost of living and they are struggling with their energy bills.
"That is why I, as prime minister, will take immediate action to help people with the cost of their energy bills and I will be making an announcement to this House on that tomorrow and giving people certainty to make sure that they are able to get through this winter and be able to have the energy supplies and be able to afford it."
Dominic Smithers