The announcement comes the week after the news the energy price cap will rise 80% to an average annual total of £3,549 from October.
At the start of her speech, Ms Truss said: “I promised I would deal with soaring energy prices. Today I’m delivering on that promise.”
It means typical households will pay no more that £2,500 a year on both gas and electricity starting from October.
Ahead of the announcement, Prime Minister Liz Truss said: “I know families and businesses across the country are worried about how they are going to make ends meet this autumn and winter.
“Putin’s war in Ukraine and weaponisation of gas supply in Europe is causing global prices to rise - and this has only made clearer that we must boost our long-term energy security and supply.
“We will take action immediately to help people and businesses with bills but also take decisive action to tackle the root cause of these problems, so that we are not in this position again.
“We will set out our plans to deliver on that promise and build a prosperous Britain for everyone.”
What did Liz Truss announce?
The Prime Minister announced that typical households will not pay more that £2,500 on energy bills a year for the next two years.
She added that this will save a typical household £1,000 a year, and this doesn’t include the £400 support households will receive.
The Prime Minister hopes that the UK would never be put into the same positon again, saying “We are supporting this country through this winter and next so we are never in same position again.”
Ms Truss said that the government would not give in to the opposition, ruling out the prospect of paying for the cap through a windfall tax and also that energy bills are going to be affordable this winter.
It was also announced that the governemnt will support the hospitality sector, including pubs and restauruants, for six months.
How will the price cap be paid for?
The Prime Minister told Parliament how the price cap will be paid for by the government.
This includes the launch of an energy supply taskforce.
She said: “The reality is we can’t tax our way to growth,” Liz Truss said.
“The policy is about helping people with their energy costs and long term energy supplies for the UK.
“The way we are going to defray the cost is first of all by ramping up supply.
“We have created a new energy supply taskforce.”
Ms Truss also confirmed that the ban on fracking has been scrapped in an effort to increase domestic energy supply.
What did Keir Starmer say?
The leader of the Labour Party said that he wants to see the windfall tax used as a way to pay for the price cap to make sure working people aren’t footed with the bill.
He added that Labour called for a price freeze to make sure that no households would pay a penny more on bills.
Mr Starmer said: “Working people are paying for the cost of living crisis.”
The leader of the opposition went on to desrcibe the Conservative ban on onshore wind in 2015 was a “policy disaster”.
He added: “The prime minister is consistently opposed to solar power and she has been consistently wrong.”
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