Gordon Brown has agreed a £910m package of measures with the big energy companies aimed at helping people with soaring gas and electricity bills.
It includes half price insulation for all households and a freeze on this year's bills for the poorest families.
Pensioners and unemployed people with young children will get an extra £16.50 a week if there is a severe winter.
But the measures were attacked as "ridiculous" by the unions, who want a windfall tax on the energy giants.
The package includes:
Free cavity wall and loft insulation for pensioners and poor households
50% off cost of insulation for all households
Freeze on this year's bills for half a million poor consumers
Partial reversal of cut to warm front programme giving free central heating to poorest pensioners
Cold weather payments to go up from £8.50 a week to £25 a week for pensioners, disabled people and unemployed families with children under five - if temperatures drop below zero for seven consecutive days
The government says its aim is to insulate every home in Britain by 2020 - and energy companies, councils and voluntary organisations will be making door-to-door visits in deprived areas to promote the scheme.
Half-baked measures such as these are not going to address the social emergency of fuel poverty
"This is the right approach, giving priority to permanent - not just one-off - changes, with the offer of lasting benefits and fairness for all families, cutting bills permanently every year," said Mr Brown at his monthly Downing Street press conference.
The prime minister said this was a "better way" than bringing in the one-off cash rebates for consumers paid for by a windfall tax on energy firms demanded by trade unions.
And for the first time, power generators such as Drax will contribute, as well as the big energy providers, he added.
The energy companies will be expected to pay for the £910m package and Mr Brown has urged them not to pass the costs on to consumers.
But David Porter, chief executive of the Association of Electricity Producers, which represents the "big six" energy firms, said they may not be able to avoid it.
"Someone has to pay for the green agenda, which is already costing a great deal of money," he told BBC Radio 4's The World at One.
He said the companies would try to contain price rises "because they have to" but added: "It remains to be seen just how much of it ends up on the customers' bill in the long term."
Lucy French explains her struggle with power bills
Business secretary John Hutton denied the government was being "soft" on the energy companies but said they had to be allowed to make a profit to guarantee future investment.
He said the government did not have the power to fix energy prices but he stressed: "We don't believe there is any justification for passing this increase on."
Average household electricity bills are already expected to increase to more than £500 per year by 2010, and gas bills to around £900.
And the government's package received a lukewarm response from poverty campaigners, who have been demanding cash rebates to help people struggling with bills.
Mervyn Kohler, special adviser to Help the Aged, said: "Half-baked measures such as these are not going to address the social emergency of fuel poverty."
And the trade unions repeated their demand for immediate relief for consumers facing soaring bills and a windfall tax.
Derek Simpson, joint leader of Britain's biggest union, Unite, said: "It is ridiculous to believe these measures are a partial or complete solution."
Thursday's announcement follows a National Housing Federation report suggesting that almost a quarter of people will be in fuel poverty by next year - defined as spending more than 10% of their income on energy bills.
A NHF spokesman said the government's measures "looked good" on the surface but "ultimately many fat cat energy bosses will be able to sleep easy tonight".
Chris Grayling, for the Conservatives, said the details of the package were "fine as far as it goes" but added: "Is this actually what we were promised?"
"We've had lots of built-up expectations over the summer that there was going to be a major relaunch package in September that would deal with a whole range of the different challenges the British people are facing, but actually what we have had is a damp squib."
He said it would not transform the fortunes of the country or "people feeling the pinch".
For the Liberal Democrats, Vince Cable said the measures were "eminently sensible, but very, very modest".
He said it was "not even clear" that the energy companies were going to pay for all of the package, adding: "The effect on the average family is completely dwarfed by the increase in energy prices that we're all going to see."
The Lib Dems did not back a windfall tax but did want a cap on price rises and a Competition Commission inquiry into the energy industry, he added.
1. Loft insulation: Prevents 15% of heat lost through the roof. 2. Tank and pipe insulation: A hot water cylinder jacket of at least 75mm cuts heat loss by 75%. 3. Cavity/solid wall insulation: About 30% of heat lost through walls. Homes built after 1920 - with cavity walls - can be injected with insulating material. Older houses with solid walls can be fitted with an extra layer. 4. Double-glazing: Can cut heat loss by about 50%. The two panes of glass create an insulating barrier. 5. Draught-proofing: About 20% of heat lost through poor ventilation and draughts. Measures include fitting brushes to letterboxes. Source: Energy Saving Trust
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