Labour would impose a 20-month price freeze to 2017 on all the energy companies, Ed Miliband announced on Tuesday, in the party's most dramatic move yet to show it is determined to address the living standards crisis.

In his keynote speech, the Labour leader told the party's autumn conference that he was pressing the reset button on profiteering energy firms.

He said: "The next Labour government will freeze gas and electricity prices until the start of 2017. Your bills will be frozen, benefitting millions of families and millions of businesses. That is what I mean by a government that fights for you. That's what I mean when I say: Britain can do better than this."

He admitted "the companies won't like it because it will cost them money. But they have been overcharging people for so long because the market does not work. And we need to press the reset button."

Labour calculates that such a freeze, which would be one of the most direct state interventions in the energy market for many years and echoes Labour's windfall tax on privatised utilities after the 1997 election, would save consumers £120 over the 20 months on average, and businesses £1,800.

It is estimated that flaws in the market have left consumers paying £3.9bn more than they should have been since 2010.

The pledge to freeze energy bills was the centrepiece of a speech arguing that only Labour understands the "cost of living crisis" gripping UK households.

Miliband's pitch to voters was that "Britain can do better than this" as he argued the country is getting wealthier without any improvement in the finances of most families.

"They used to say a rising tide lifts all boats," he said. "Now a rising tide just seems to lift the yachts."

The proposals would be backed by new legislation and Labour will demand that David Cameron take action if the energy companies respond to the proposed freeze by raising prices.

It is arguable that the gas regulator, Ofgem, already has powers to impose price controls. Senior shadow cabinet ministers also admit that the energy firms would seek to judicially review the decision, but Labour says it has legal advice that the proposal will be cleared with the EU competition authorities.

The energy firms will cry foul partly because they will say the profits are necessary to deliver much-needed investment, but Labour counters that some of the companies with the largest profits have invested the least.

The House of Commons has completed estimates for Labour showing that the cost of the measure will be £4.5bn in the 20 months between May 2015 and January 2017.

Miliband said: "We need successful energy companies that invest in the future but you also need to know you are getting a fair deal. We need long-term certainty for companies, and we will ensure that. But we must also have a regulator who will cut your prices if companies are charging too much. When competition fails government must be prepared to take action – with the train companies that put the price of the daily commute further and further out of reach, with the pay-day lenders who put so many families in debt and with the big gas and electricity companies whose bills just go up and up."

During the hour-long speech, Miliband also unveiled plans to give 16- and 17-year-olds the vote, as well as building 200,000 new homes per year by the end of the decade.

The Labour leader contrasted his personality to David Cameron, saying the prime minister "may be strong at standing up to the weak but he is weak at standing up to the strong".

He invited the Tories to "be my guest" if they want to have a debate about the character of their leaders, arguing Labour believes politicians can be decent.

Speaking without notes, the Labour leader also laid into the Tories for having "low aspirations" and engaging in a "race to the bottom" as they accept falling wages as the price for competing in a global economic race.

He said Labour would engage in a positive "race to the top" by strengthening the minimum wage, cutting taxes for small businesses, forcing companies to offer more apprenticeships and increasing free child care.

In a reference to Lord Howell, a government adviser, who referred to the north-east as "desolate", he said: "The Tories call them desolate. We call them friends, and the heroes of our country."

David Cameron has also been "running down the NHS", doctors and nurses, as he seeks someone to blame for the government's health policies going wrong, Miliband added.

He also mocked the coalition's boasts that the economy is improving, saying it should have done better at maintaining standards of living.

"Come on, this is the slowest recovery in 100 years," he said.

After several standing ovations during the speech, Miliband touched on his attempts to reform Labour's links with the trade unions near the end. He won support from the crowd as he said change would be "difficult" but necessary.

He also remembered to touch on green issues, after forgetting that part of his speech last year, arguing Britain "cannot afford not to take climate change seriously".