Copyright glasgowworld
Ofgem plans to wipe up to £500 million in unpaid energy debt built up during the energy crisisThe cost will be spread across all households, adding around £5 to annual bills from 2027/28Around 195,000 struggling customers will benefit, while millions who’ve kept up payments will help fund the write-offEnergy debt has hit £4.4 billion, with some households owing more than £1,700 eachMPs have called for windfall taxes on suppliers instead of passing the cost to consumers Millions of households are about to help pay for a £500 million debt write-off, even though they never missed a payment. Under new plans by energy regulator Ofgem, unpaid energy debts built up during the cost of living crisis will be cleared, but the cost will be spread across everyone’s bills. From 2027/28, the average household will pay around £5 extra per year to help energy suppliers recover money that’s unlikely ever to be repaid. The move will wipe out up to £500 million in historic debt, offering relief to roughly 195,000 struggling households who fell behind on payments during the energy crisis. But it means that millions of other households, including those who’ve managed to stay on top of their bills, will shoulder part of the cost. What’s changing - and why? Currently, every household already pays around £52 a year through their energy bills to cover unpaid debt within the system. Ofgem says that without action, that figure could keep rising as debt levels spiral. By writing off old, unrecoverable debt, Ofgem hopes to “reset” the system, effectively clearing the slate so suppliers can refocus on helping struggling customers stay on track rather than chasing impossible repayments. Energy debt across Great Britain has ballooned to record levels; £4.4 billion as of June, according to Ofgem. The average household without a repayment plan owes £1,716, reflecting how high energy prices and squeezed incomes have collided. Ofgem says the scheme is a “necessary reset” to stop the system collapsing under the weight of unpaid bills. In a worst-case scenario, as much as £1.7 billion in historic debt may never be recovered. Can’t somebody else pay for it? Some MPs have urged Ofgem to consider alternative funding, such as using windfall taxes on energy companies’ recent profits instead of adding costs to consumer bills. But the regulator says the system relies on costs being spread across all users, and that reforming how energy debt is managed in future will help prevent another surge. What to expect next The first phase of the debt relief scheme is due to launch early next year, targeting households on means-tested benefits with more than £100 of energy debt built up during the crisis. Those eligible will need to contribute where they can or work with debt advice charities to manage repayments. Charlotte Friel, Ofgem’s director for retail pricing, said: “We must strike the right balance between supporting those who need it and protecting all consumers. “These proposals will relieve the burden of unmanageable debt while reforming how it’s handled in the future.”
