A new deal between the government and energy firms that will reduce household bills is near to being finalised today after pressure was applied to the prime minister from union leaders to impose windfall taxes on energy firms'  fat profits.

However, leaders fear that the focus of the deal will remain confined to making homes more long-term energy-efficient instead of demanding a straight forward cut in energy companies' profits.

For example, the package of measures is expected to include better insulation of all homes over the next decade as well as targeted help for householders least able to pay in ensuring they gain access to the best energy deals on offer.

The 'big six' energy firms, which include British Gas and NPower, made profits of £1.6bn last year and have raised prices by 42% so far this year as homeowners faced higher mortgage, petrol and food costs.

As a result, almost a quarter of the population will be pushed into fuel poverty by the end of next year, according to a report published on Monday.

The National Housing Federation said by the end of 2009, 5.7 million UK households will be spending at least 10% of their income on energy bills.

Average household electricity bills are expected to increase to more than £500 per year by 2010, and gas bills to around £900.

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