UK Chancellor Rishi Sunak says the government will set aside more than €10 billion to support customers.
Energy bills UK households are set to rocket by more than €800 a year, it was announced on Thursday.
Britain’s energy regulator said that -- from April -- the new price cap will rise by a record 54% to £693 (€833) per year for the average household.
The annual bill for the average customer will now likely increase to £1,971 (€2,370), according to the Office of Gas and Electricity Markets (Ofgem).
The huge hike is being blamed on the soaring cost of wholesale natural gas.
The decision is likely to affect 22 million households across the UK, many of whom have already been squeezed by rapidly climbing bills.
UK Chancellor Rishi Sunak has immediately announced a package of measures to help those on lower incomes cope with the increases.
“Without government action, this will be incredibly tough for millions of hardworking families,” Sunak told MPs on Thursday.
Sunak stated that the UK government would make £9 billion (€10.8 billion) available to ease the burden on households and spread the extra costs over time.
Customers will get a £200 (€240) discount on bills from October, which will be repaid in small instalments over the next five years.
Around 80% of council taxpayers will also get a £150 (€180) saving this year, Sunak said.
The combined measures will help most households cover about half of the extra energy costs, he added.
The Ofgem announcement comes as food costs in the UK have been steadily rising, while a tax increase is set to take effect in April.
The Bank of England also raised interest rates again on Thursday from 0.25% 0.5% to combat rising consumer prices.
Inflation in the country is at its highest in decades-- currently standing at 5.4% as of December, but possibly rising to 6% in April.