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The new move could help alleviate debt for 195,000 people (Picture: Getty) Listen to article Listen to article Your browser does not support the audio element. Thousands of people are set to have their energy debts wiped after the regulator launched a new relief scheme. Ofgem plans to increase annual energy costs by £5 per household in 2027 and 2028, meaning that this could raise £500 million. This will help cover the costs of energy debt for some 195,000 people. Ofgem said the price rise could be lower depending on how the scheme is taken up, and expects this will be somewhat offset by the measures reducing how much customers pay towards debt-related costs. It came as watchdog Ofgem said it is planning to ‘reset and reform’ the UK’s growing pile of energy debt. Currently, £52 is added to annual household energy bills under the current price cap via a debt allowance to cover energy debts that are never paid and have to be written off. Money owed to suppliers in the UK surged to £4.4billion in June (Picture: Getty) Figures published by Ofgem last month showed that the money owed to suppliers by households in England, Scotland and Wales surged to a new record high of £4.4 billion by the end of June. The average debt for people who do not have a repayment plan with their provider currently stands at about £1,716 per household. Ofgem said that in a worst-case scenario, between £1.1 billion and £1.7 billion of historic debt, according to supplier estimates, is never paid and will be written off. It comes only a day after MPs called on the regulator to pay down some of the energy debt bill through windfall taxes on suppliers. However, the cost of unpaid debts will continue to be covered by being reclaimed across all households’ bills. Ofgem said it is pushing forward with proposals to bring the debt down and reform how these debts are managed in order to prevent them growing as high in future and, therefore, reduce the cost to all households. Other proposals by Ofgem include plans to trial changes to the process households must follow when they move into a new property. Charlotte Friel, director for retail pricing and systems at Ofgem, said: ‘We know the growing amount of debt in the energy system is a significant challenge. ‘We must protect consumers by striking the right balance between making sure those who can pay are supported to do so, and targeting support at those who need it most.’ The first phase of the scheme, set to launch early next year, will focus on people in receipt of means-tested benefits with more than £100 of debt built up during the energy crisis. It added that eligible households will be expected to make some contribution towards debts and current energy use, or work with debt advice charities if unable to make payments. Get in touch with our news team by emailing us at webnews@metro.co.uk. For more stories like this, check our news page.
