The UK energy regulator Ofgem plans to write off up to £500 million in household energy debt. The cost will be recovered through a £5 increase on annual energy bills in 2027/28, spreading the burden across all households.
Around 195,000 people will benefit from the debt relief scheme, which launches in early next year. The first phase targets individuals receiving means-tested benefits who have accumulated over £100 in debt since the energy crisis began.
Eligible households must contribute towards their debts and current energy usage, or engage with debt advice charities if unable to pay. Ofgem is also proposing broader reforms to how energy debt is managed in the sector to prevent future accumulation.
Charlotte Friel, director for retail pricing and systems at Ofgem, said: «We know the growing amount of debt in the energy system is a significant challenge. We must protect consumers by striking the right balance between making sure those that can pay are supported to do so, and targeting support at those who need it most.»
Record Debt Levels
Household energy debt reached a record £4.4 billion by the end of June in England, Scotland and Wales. Households without repayment plans owe an average of £1,716 each. Energy suppliers estimate that between £1.1 billion and £1.7 billion may never be recovered in a worst-case scenario.
The current price cap already includes £52 annually to cover unrecoverable energy debts. MPs recently called for windfall taxes on suppliers to address the debt crisis instead of additional bill increases.
Note: This article was created with Artificial Intelligence (AI).
