At the same time, Ofgem has announced a new scheme to reduce energy debt for people on means-tested benefits. Under the plan, energy debts over £100 due during the period from April 2022 to March 2024 would be cancelled. This step meets the rapidly rising energy prices. Admin burdens unpaid bills and fees have hit an unprecedented £4.4 billion in arrears to vendors throughout the UK.
New estimates show that more than a million households are now in arrears without any plan to settle their energy arrears. Energy costs have surged, causing extreme hardship for households already facing so much stress. Just ask the thousands of them who are now surviving on razor-thin margins—or worse. Speaking last week, Ofgem’s Charlotte Friel acknowledged the pressures from increasing energy debt are significant. This is a huge problem for families—particularly those who are already at the edge with skyrocketing bills.
Under the new plan, Ofgem hopes to recover or scrap as much as £500 million. This change would be a good step toward reducing the accumulation of unpaid bills. Experts warn this is a plan that could at best slow the pace of growing outstanding debts, not reverse their trajectory. Ned Hammond, from Energy UK, welcomed the announcement as an “essential first step.” He stressed that more expansions are needed to truly address the growing debt crisis.
To be eligible for any debt cancellation at all, borrowers need to show a little bit of good faith about repaying money that is due. These suppliers will be forced to find people who are willing to partially pay off their debt or pay for future energy consumption. If they can’t pay a bill, the onus is on the customer to contact a debt charity. This new organization will help them figure out how to pay for it all.
Moreover, the energy debt crisis has deepened rapidly. Arrears in England, Wales, and Scotland rose by £750 million in just one year. Dispute resolution A cross-party committee of MPs has called on energy network companies to invest some of their “overearnings” to help clear energy debt. Yet this goes to show the urgency and severity of the moment.
Ofgem’s proposal is a positive response to very scary projections from suppliers. They estimate that between £1.1 billion and £1.7 billion of legacy debt in the system is likely unrecoverable. Almost 200,000 people on benefits could gain new opportunities due to this program. No, they simply have to show the political will to pay their overdue invoices.
The plan Ofgem has laid out is due to be implemented early next year, after a consultation period. Collaboratively created, stakeholders are confident that this plan is a solid step in the right direction. They argue that we need more holistic solutions to deliver meaningful, long-term relief to households languishing in energy debt.
