UPDATE 2-Brown says no tax on utilities windfall profits

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LONDON, Sept 11 (Reuters) - British utility companies will not be forced to pay a tax on windfall profits, Prime Minister Gordon Brown said on Thursday.

The six major energy suppliers will instead contribute to a one billion pound ($1.75 billion), three-year energy-saving initiative to help those struggling to pay soaring fuel bills.

The package was negotiated after talks with E.ON UK, a unit of Germany's E.ON (EONGn.DE), Centrica PLC (CNA.L), RWE's (RWEG.DE) npower, Iberdrola's (IBE.MC) Scottish Power SPW.PZ, Scottish & Southern Energy (SSE.L) and EDF Energy, part of France's EDF (EDF.PA).

"We looked at all possible options of both raising money and the action that we could take and that has been an inquiry that we had over the summer months," Brown told his monthly news conference.

"Instead of a windfall tax, this is the better way of moving forward."

Brown said he did not expect the 910 million pounds being raised from the energy companies to be passed on in the shape of higher household bills.

Environment Secretary Hilary Benn said pensioners and people on low incomes or benefits would receive free loft and cavity wall insulation, while others would receive a 50 percent discount.

"The Government has a longstanding commitment to help those living in fuel poverty, but recent price rises mean we are committed to do even more to assist people in reducing their bills where possible," he told the same news conference.

"This plan is about giving help, not only over weeks and months, but over the coming years by enabling householders to make their homes more energy efficient." (See also BRITAIN-FUEL/(FACTBOX) [nLB62575]) (Reporting by Frank Prenesti; Editing by Jeremy Lovell)