Liz Truss plans to protect households from the full impact of soaring energy prices with a £90 billion intervention.
The new Prime Minister, who took office after meeting the Queen in Balmoral, is thought to be planning to freeze bills at around the £2,500 mark – some £500 higher than current levels but more than £1,000 below next month’s cap.
Details have not yet been finalised, but the plan is expected to be funded through general taxation or increased borrowing rather than paid for in future energy bills.
Ms Truss became the UK’s third female Prime Minister after meeting the Queen at her Scottish estate.
The handover of power from Boris Johnson took place at Balmoral rather than Buckingham Palace because of the 96 year-old monarch’s mobility problems, with Ms Truss becoming the Queen’s 15th prime minister.
Ms Truss, who won the Tory leadership on Monday, will travel to Westminster to address the nation from Downing Street later on Tuesday afternoon.
She is also putting together her Cabinet with Business Secretary Kwasi Kwarteng expected to take the key post of chancellor.
But Nadine Dorries turned down the offer to stay on as Culture Secretary, while former Tory leader Sir Iain Duncan Smith said that he had also rejected a Cabinet post.
Ms Truss will face her first session of Prime Minister’s Questions in the Commons on Wednesday and could set out her energy package on Thursday.
A Government source confirmed a Times report that the energy freeze will be at around the £2,500 mark, although an insider in the Truss camp said “nothing is finalised yet”.
The plan is based on the current £1,971 energy price cap plus the £400 universal handout announced under Mr Johnson’s government.
Help is also expected for business customers struggling with soaring bills which are not covered by the existing energy price cap in England, Scotland and Wales.
In his farewell speech before leaving office, Mr Johnson said: “I know that Liz Truss and this compassionate Conservative government will do everything we can to get people through this crisis and this country will endure it and we will win.”
His speech included a plea for the Tory party to unite behind his successor, but he could not conceal his bitterness at the way he was ousted.
He suggested he would now slip into political obscurity, although a reference to Roman statesman Cincinnatus fuelled speculation he could consider a comeback.
Mr Johnson said “I will be offering this government nothing but my most fervent support”, calling for Tories to back the new leader at a “tough time for the economy”.
Watched by wife Carrie Johnson, he added that if the couple’s dog Dilyn and Larry the No 10 cat can “put behind them their occasional difficulties”, then “so can the Conservative Party”.
But in a sign of lingering resentment at the manner in which he was forced out, Mr Johnson said that “the baton will be handed over in what has unexpectedly turned out to be a relay race. They changed the rules halfway through but never mind that now”.
He said his career was now like a booster rocket “that has fulfilled its function and I will now be gently re-entering the atmosphere and splashing down invisibly in some remote and obscure corner of the Pacific”.
Mr Johnson declared “like Cincinnatus, I am returning to my plough” – before entering No 10, an ambitious Mr Johnson had frequently said he would serve as prime minister if he was “called from my plough”.
Opposition politicians called for oil and gas firms to pay for the freeze in bills, rather than letting taxpayers pick up the tab.
Liberal Democrat leader Sir Ed Davey said: “Liz Truss spent weeks during this summer leadership contest leaving families and pensioners worried and in limbo by refusing to set out her plans to tackle soaring energy bills.
“Now she seems set to make our children pick up the tab for this mess, while letting oil and gas firms making record profits off the hook.”