Ed Miliband today said he would make it illegal for energy companies to increase the price they charge for gas or electricity during the first 20 months of a Labour government.
All UK homes and businesses would benefit from the move, which Labour believes would cost major energy companies £4.5bn.
Miliband will also commit to breaking the link between energy production and the companies that sell gas and electricity to consumers. He said Labour will legislate to force all producers to pool their energy in a central marketplace. Suppliers will then purchase energy out of this pool.
Many shareholders in the the UK's major energy companies are pension funds, who would be expected to lose out under the reforms. But sources close to the Labour leader said this was irrelevant as "the people screwed over [by high energy prices] are pensioners".
If Labour win the May 2015 general election they would immediately pass legislation that would cap existing prices until January 2017.
Members of Ed Miliband's team told City A.M. that they would have no sympathy for energy firms if wholesale energy prices rose dramatically during this period. They said the energy suppliers would simply have to accept substantially reduced profits because they have done so well in the past.
Once the freeze on energy payments ends in 2017, Labour will give a new energy watchdog the ability to force down consumer bills if it believes the energy firms are taking excessive profits.
Labour said it had received advice from a QC that the move would be legal under EU law.
Miliband is attempting to produce policies that reflect what he terms "the cost of living crisis". The Labour leader believes he can win voters who are not feeling the benefit of continued economic growth.