After a summer of uncertainty, new Prime Minister Liz Truss has unveiled her plans for helping households cope with the soaring cost of energy bills.

How the country's new leader - who is just 48 hours into her new job - attacks the cost of living crisis is sure to be among her biggest tests after energy price cap predictions suggested that gas and electric bills could rise above £4,600 for the average home by the middle of next year.

In a much-anticipated announcement in the House of Commons it has now been confirmed that the brakes are being applied to some of these big future increases and the price that we pay for gas and electric is being frozen from next month.

But what does this mean for what we'll pay this winter and - with windfall taxes on the multi-billion profits of energy firms having been ruled out - how will the country cover the mammoth costs of cutting our bills in the long term?

What is the new plan?

Right now the typical energy bill for an average-sized household is £1,971.

From October 1 this had been due to rise by 80% to more than £3,500 with further increases also expected next January and April. These rises are being driven by a permitted increase to the energy price cap, which controls the amount companies are allowed to charge, in order to reflect the fluctuating costs of wholesale gas and electric.

The government's rescue package will now limit the October increase to £2,500 for the average household with a typical-sized bill - so while around £500 more than most of us are paying now it will be £1,000 less than what was expected - with the government bridging the gap between what we will pay from next month and what the true costs of gas and electric are this winter because of course energy companies will still require their money.

It is also worth remembering that this cap doesn't freeze the overall amount you pay, but instead freezes the price for the units of energy used, and so those who use more energy will pay more than the average £2,500 while those who use less gas and electric will pay less than the average bill payer each month.

For those using heating oil, living in park homes or on heat networks a separate fund, says Liz Truss, will be set up to ensure people with alternative energy supplies still get equivalent levels of help.

How long will bills be frozen for?

Liz Truss says the policy will remain in place for two years while her government gets the energy market 'back on track'.

It means households won't be subject to next year's predicted price cap rise, that could have sent bills close to £5,000, and on average households will now save £1,000 a year, she expects.

What about businesses?

With no price cap to control their bills, companies have been crying out for help as more and more money is spent on meeting the escalating price of gas and electric.

Businesses, charities and the public sector will all get help, says Liz Truss, under similar arrangements now being set out for households. This will last initially for six months, after which further help will be offered to 'vulnerable sectors' that could include the hospitality trade and hospitals.

How is it being paid for?

Unless Boris Johnson left a few million pounds down the side of their Downing Street sofa, Liz Truss has got to find from somewhere the money to pay for her proposed energy price freeze, which is being reported to cost in the region of £150 billion depending on the future volatility of the energy market and how high wholesale costs are pushed over the coming months.

Energy companies, which are being permitted to charge more to cover their own rising costs, won't expect to be out of pocket so how can the costs of a nationwide energy price freeze be met?

Liz Truss, who says there are no 'cost free options, has ruled out any plan to tax the huge profits of gas and oil producers - she maintains that heavily taxing big companies won't help encourage the economy to grow as it dissuades firms from investing within the UK.

Instead the government's intention is to borrow the money needed to cover the gap between the price energy bills will be frozen at for people and the real cost of gas and electric - with some suggesting the amount of money needed to do this could ultimately be greater than the final cost of the Covid-19 furlough scheme.

This borrowing ultimately works like a loan, with interest, that taxpayers ultimately have to cover the cost of.

The full details and costings will be set out by the new Chancellor in a fiscal event - or mini budget - later this month but the new lower price cap will result in the suspension of green levies.

A new Energy Supply Taskforce is also being set up to negotiate new long-term energy contracts for the country to bring down the costs the government is needing to cover and oil and gas production in the North Sea is likely to be ramped up to increase supply.

That proposal, at a time when interest rates on the country's national debt, has led to one of the first big disagreements between the new leadership and her opposition - as Labour MPs express their outrage that it will be ordinary people eventually left paying for the policy rather than companies with huge profits.

While the Labour party was fully in favour of a plan to freeze bills - a proposal it also put forward this summer - Keir Starmer has hit out at the intention to borrow the money to pay for it in the absence of a financial contribution from energy firms.

Labour deputy leader Angela Rayner has also been quick to critisise the new PM's decision not to tax oil and gas firms, writing on Twitter that the new Prime Minister should be focussed on relieving the burden on working people.

What about the £400 October energy bill credit?

Introduced by Rishi Sunak when he was Chancellor - the £400 credit households will get on their energy bills next month to help cover rising bills will remain in place and is still on the way.

Being given to every household with a domestic energy contract, it means this help combined with the government's latest policy to freeze bills. should take a typical yearly bill to around £2,100 once prices are frozen.

Those who use less energy will arguably benefit more for from the £400 cash payment, as it becomes a larger percentage of their overall bill, and for those who use more energy it will make less of a dent on their rising winter costs.

The £400 payment will appear as a 'credit' on people's energy bills, doesn't need to be paid back, and should begin appearing on household statements from October.

What other help is coming?

While the £400 energy credit is cash being given to all households with a domestic energy contract - regardless of whether they receive any other benefits or not - there is additional money still to come for those on Universal Credit or receiving other financial state support.

Millions of low income households claiming means-tested benefits are being given a £650 cost of living payment to help with rising bills.

Being broken down into two separate instalments, the first payment of £326 was sent in July, and a second instalment of £324 will be sent to qualifying households this autumn. Pensioners who receive winter fuel payments have been allocated £300 and those on non-means-tested disability benefits £150.

Imran Hussain, director of policy and campaigns at Action for Children, has welcomed today's announcement but says he would like to see targeted help for families with children who face higher costs.

He explained: "The new Prime Minister must make good on her pledge to deliver, deliver and deliver. Thursday is D-Day for millions of families with children and will determine whether they go under this winter. Few of us will escape the pain of soaring living costs, but it’s a different world of pain for families on benefits already rationing the basics, with nothing left to trim.

"We welcome the Prime Minister’s recognition of this crisis, but the support package must include proper targeted relief for families with children as they face higher costs. The simplest and quickest way to do this is by raising benefits and adjusting payments for family size and needs."