Highlights
- Ofgem will write off £500m in energy debt to help 195,000 vulnerable households from 2026.
- Unpaid energy debt of £4.4bn adds £52 to every household’s annual bill.
- Ofgem plans to end the ‘occupier’ system causing £1.1–£1.7bn in uncollected debt.
The debt relief scheme, expected to launch in early 2026, will target households on means-tested benefits who accumulated more than £100 in debt between April 2022 and March 2024 during the energy crisis. Eligible customers will be automatically identified and contacted by their suppliers.
Currently, £4.4 billion of unrecovered energy debt sits in the system, adding £52 to every household's annual bill under the current price cap of £1,755. The debt makes up roughly 3 per cent of typical energy costs, spreading the burden across all consumers.
The new scheme will be funded through a levy on bill payers, adding approximately £5 to annual bills for one year from 2027/28, Ofgem told Reuters.
Debt relief plan
Ofgem is also proposing changes to how energy accounts work when people move home. Under current rules, when someone moves into a property, the account switches to 'occupier' status and bills accumulate anonymously until the new resident registers with a supplier. This uncollected debt, estimated between £1.1 bn and £1.7 bn, accounts for up to a third of total energy debt.
The regulator plans to trial a new system requiring people to set up accounts when moving in, similar to practices across Europe. Safeguards will protect vulnerable consumers, including adding credit to smart meters switched to prepayment mode.
"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, Ofgem's director for retail pricing and systems.
Energy bills remain 50 per cent higher than summer 2021 levels, before Russia's invasion of Ukraine triggered soaring gas prices across Europe.
