Every household in the country will have €100 knocked off first electricity bills of next year

The significant state intervention – which will cost more than €170m – is aimed at easing the financial burden of rising energy prices as inflation continues to soar at record levels.

The one-off €100 electricity credit will cover the first two months of the year and will be deducted from domestic household bills in March.

Plans for the major energy subsidy are at an advanced stage and the Government is anxious to introduce the measure in the winter months.

The electricity credit scheme is being developed by Finance Minister Paschal Donohoe, Public Expenditure Minister Michael McGrath and Climate Action Minister Eamon Ryan.

The funding for the unprecedented initiative will come out of Mr Ryan’s departmental budget and the Green Party leader is preparing a memo to bring to Cabinet on Tuesday.

It is expected legislation will be needed to underpin the subsidy, which will be paid directly to suppliers.

The Commission for Regulation of Utilities and electricity suppliers will be consulted ahead of the intervention.

In October’s Budget, the Government also introduced increases in the fuel and living alone allowance which were also specifically aimed at reducing the cost of energy bills.

It comes as data from the Central Statistics Office (CSO) showed the annual rate of inflation rose to 5.3pc in November – its highest in 20 years.

Over the past year the cost of electricity has shot up by 21pc, with gas prices going up by 26pc, according the CSO.

It also found home-heating oil costs are up by more than 70pc in the past year while rental cost rises of 8pc are a new record high. Bonkers.ie has warned annual household energy bills could rise by as much as €1,300 amid a series of price hikes.

Tánaiste Leo Varadkar acknowledged the impact the rising rate of inflation is having on families and said the Government was examining ways to reduce energy costs for households.

“We’d hope to be in a position to make a decision on that in the near future, so that people will see the effect of that in the bills that they receive in the new year, being a little bit less than perhaps they expected,” Mr Varadkar said.

“We do need to help and Government is helping in at least four ways; pay increases, welfare and pension increases, a reduction of personal taxation and also help with the cost of living for a number of services.”

Government did examine the possibility of reducing the public service obligation levy on electricity costs but instead decided to introduce the one-off €100 credit.