In a bold move that will affect millions of households, energy regulator Ofgem has unveiled plans to add a temporary charge to bills to clear an estimated £3 billion in customer debt accumulated during the cost-of-living crisis.
The Debt Dilemma: Why Bills Are Rising
Under the proposed scheme, energy suppliers would be allowed to recover bad debt through a one-off increase to the price cap. This would translate to an additional £1.33 per year on the typical dual-fuel energy bill for a period of twelve months, starting in April 2024.
The regulator argues this approach represents the fairest way to address the mounting crisis while preventing suppliers from collapsing under the weight of unpaid bills.
Enhanced Protection for Vulnerable Customers
Alongside the debt recovery plan, Ofgem is strengthening safeguards for households struggling with payments. The new measures include:
- Extended repayment periods for customers using prepayment meters
- Stricter requirements for suppliers dealing with vulnerable customers
- Better payment plan options for those in financial difficulty
- Enhanced monitoring of suppliers' treatment of struggling households
These protections aim to ensure that those most affected by the energy crisis receive appropriate support and aren't pushed further into financial hardship.
Industry Reaction and Consumer Impact
Consumer groups have expressed mixed reactions to the proposal. While acknowledging the need to address the debt mountain, there are concerns about adding any additional pressure to household budgets already stretched to breaking point.
The energy industry has largely welcomed the move, arguing that without intervention, the growing debt burden could destabilise the entire market and lead to higher costs for all customers in the long term.
Ofgem emphasises that the alternative – allowing energy firms to collapse under debt pressures – would ultimately prove more costly for consumers through supplier failure costs passed on in bills.
Looking Ahead: The Future of Energy Affordability
This temporary measure comes as part of Ofgem's broader strategy to create a more resilient energy market. The regulator continues to work with government, consumer groups, and suppliers to develop long-term solutions to the affordability crisis.
Households are encouraged to contact their energy suppliers directly if they're experiencing payment difficulties, as support options and payment plans are available for those who need them.
