Incoming UK Prime Minister Liz Truss has agreed to plans to fix annual electricity and gas bills for a typical UK household at or below the current level of £1,971, according to a Bloomberg report.

The report said Truss has settled on a mechanism that will avert the massive increase in energy bills that is due to kick in next month under the existing pricing system.

The policy could cost as much as £130 billion over the next 18 months, according to policy documents seen by Bloomberg.

Energy bills in the UK were due to jump 80% from October to £3,548 a year on average.

Under the plans drawn up by Truss’s team, that pricing regime will effectively be abolished and the energy regulator Ofgem will be sidelined.

Ministers will now set a new unit price that households will pay for electricity and gas, the report said.

The report said energy companies have been receptive to the idea, which means they will avoid a windfall tax and see the shortfall in their revenue covered by the taxpayer.