Regulator Ofgem is proposing a scheme that could cancel energy debts for as many as 200,000 people on means-tested benefits — provided they make some effort to clear what they owe. The plan, expected to begin early next year after consultation, targets outstanding balances built up between April 2022 and March 2024.
Under the proposals, anyone on means-tested benefits with more than £100 of energy debt from that period could be identified by their supplier and become eligible for debt relief. Eligible customers would have to make some contribution toward the debt or ongoing energy costs; those who cannot pay would be expected to accept support from a debt charity to help manage their finances. Suppliers would carry out the identification process.
Ofgem estimates the measure could cancel or recover up to £500 million of the record £4.4 billion owed to suppliers across England, Wales and Scotland. Energy debt rose by about £750 million in the last year. However, the regulator says the first phase would probably only slow the growth in customer debt rather than reverse it entirely.
The cost of cancelling or recovering this portion of debt would be spread across all households via an additional charge of about £5 on gas and electricity bills. For context, households on a price-capped tariff already contribute roughly £52 a year toward historic debt as part of an average £1,755 annual bill.
A separate issue Ofgem is examining is so-called anonymous accounts created when someone moves into a property and the supply stays registered to the previous occupier. Suppliers estimate these accounts may account for between £1.1 billion and £1.7 billion of historic debt. To address this, Ofgem is considering a system used in other countries that requires new occupants to sign up to the supply. As a short-term safeguard to prevent disconnection, smart meters at such properties would be set to prepayment mode with a small amount of credit, leaving residents to top up or formally register with the supplier. That proposal would apply only where a smart meter is already installed.
The plans have drawn mixed reactions. The Energy Security and Net Zero select committee of MPs urged that the debt be cleared using “excess” profits made by energy network companies, calling it unacceptable that households choose between eating and heating while companies record large profits. Ofgem said renegotiating price controls to capture those profits could add costs for consumers that would outweigh the benefits.
Industry and charity responses ranged from cautious support to calls for broader action. Energy UK described the scheme as a useful first step that must be expanded to reach more customers. National Energy Action’s chief executive welcomed the intervention as long overdue, saying it offered a meaningful attempt to relieve people who cannot bear the burden of household energy debt.
Ofgem says these measures — combined with longer-term work to reduce anonymous-account debt and improve repayment arrangements — could help protect vulnerable households, lower the risk to other billpayers, and make the sector better able to invest.
