In a significant move to tackle soaring household debt, Ofgem has announced plans to write off up to £500 million in unpaid energy bills, bringing relief to thousands of struggling UK households.
The energy regulator’s fresh initiative is part of a wider strategy to “reset and reform” how energy debt is handled, following a surge in arrears during the energy crisis.
Ofgem Launches £500m Energy Debt Relief for UK Households
The scheme is expected to benefit around 195,000 people, many of whom have been battling unmanageable energy debts since prices spiked in recent years.
“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,” said Charlotte Friel, Director for Retail Pricing and Systems at Ofgem.
£4.4 Billion in Unpaid Bills
Latest figures show that household energy debt across England, Scotland, and Wales hit a record £4.4 billion by the end of June. On average, homes without a repayment plan owe a staggering £1,716.
Ofgem estimates that in the worst case, between £1.1 billion and £1.7 billion could remain unpaid indefinitely, placing pressure not only on suppliers but on all bill-paying households who are indirectly covering these costs.
Currently, households are paying an extra £52 a year on their energy bills to help cover written-off debts. This cost is shared across all consumers.
What’s Changing And Who Qualifies?
The first phase of the debt relief scheme, expected to launch early next year, will specifically target:
- Households on means-tested benefits
- Those with more than £100 in energy debt built up during the crisis
While some level of repayment or engagement with debt advice charities will be required, the goal is to ease the financial load significantly.
Ofgem confirmed that a final consultation on this initial phase will be released shortly.
Nearly 200,000 UK households may soon see chunks of their energy debts wiped, as Ofgem launches a sweeping new plan to tackle the cost-of-living crunch.
Reforming the System, Not Just the Debt
Ofgem isn’t just aiming to wipe the slate clean for struggling households. It’s also working on long-term reforms to stop the debt mountain from growing again.
Proposals include:
- Changing the process for households moving into new properties
- Reviewing how debt is tracked and managed by suppliers
- Introducing more tailored support for at-risk households
This comes just a day after MPs demanded that some of the debt be offset using windfall profits from energy suppliers a proposal that has gained significant public support.
Still, Ofgem clarified that, even under the new scheme, unpaid debts will continue to be redistributed across all customers’ bills unless broader changes take effect.
A System in Urgent Need of Reform
The energy debt crisis has become a symbol of the wider cost-of-living pressures hitting British households. With winter approaching, the relief plan could offer timely support for those at risk of falling deeper into arrears.
However, the regulator faces mounting pressure to not only provide short-term fixes but also to address the root causes of household vulnerability in the energy market.
As Ofgem presses ahead with its consultation and pilot schemes, the hope is clear: to avoid another debt pile-up and create a system that works for everyone, not just the suppliers.
If you’re on a low income and struggling with energy debt, now might be the time to check your eligibility for the scheme or seek advice from recognised debt support charities. More updates are expected in the coming weeks as the consultation progresses.
