Ofgem and government expect suppliers to do more as energy debt hits £5bn

The government and Ofgem set out a joint strategy on 28 October to tackle £5bn of consumer energy debt in Great Britain, expecting suppliers to do more.

The £5bn is the total for the second quarter of 2026 and has tripled since 2021, after fossil fuel prices spiked following Russia’s invasion of Ukraine.

Managing that debt adds about £67 a year to bills, as a weighted average across payment types, almost double the pre-2022 level, the strategy says.

More than 2 million households are in energy debt and arrears, and the strategy says the costs of bad debt are shared across consumer bills.

The strategy says suppliers “should learn from and adopt best practice” to help customers manage their energy bills and avoid getting into debt.

It also says “consumers retain overall responsibility for paying their bills”, while stating that every party involved has a critical role in tackling energy debt.

The Debt Relief Scheme, due to launch in spring 2027, is a one-off measure for customers in genuine need who cannot realistically repay.

That £2.47bn is the debt targeted rather than a write-off total, as Ofgem said the final sum depends on customers engaging with the scheme.

Ofgem’s impact assessment found around 2.4 million customers with historic debt who may be considered for support, though not all will qualify.

The scheme will now run in a single phase, covering pensioners and people on disability benefits as well as those on means-tested benefits.

Customers helped will be expected to engage with their supplier and take steps to stop debt building again, with safeguards kept for the most vulnerable.

An Ofgem consultation in November 2025 proposed a first phase only, writing off debts from April 2022 to March 2024 for means-tested benefit recipients.

It proposed an early 2026 start, subject to legislation on data sharing with the Department for Work and Pensions; the launch is now set for spring 2027.

The same consultation put total energy debt and arrears at £4.4bn in the second quarter of 2025, a 20% rise on the previous 12 months, against £5bn a year later.

The strategy cites Citizens Advice research showing 1 in 3 households worried about paying their energy bills in the winter before it was written, and around 6.8 million struggled to afford them reliably.

Government analysis suggests the strategy could save a typical household around £130 over 10 years by avoiding debt costs being added to bills.

Ofgem chief executive Tim Jarvis said “too many households are still weighed down by debt built up during the energy crisis”.

Energy Secretary Miatta Fahnbulleh said the government was “helping vulnerable people in energy debt with targeted support”.

Government analysis says payment reforms, including reviewing standard credit and promoting smart prepayment, with home-moves changes, could save a typical household almost £20 a year in future years.

Ofgem will also review rules on involuntary prepayment meters, aiming to protect the most vulnerable while letting suppliers tackle rising debt proportionately.

Ofgem will consult shortly on the revised proposals, with the Debt Relief Scheme expected to launch in the spring.