On October 30, 2025, Ofgem, the UK’s energy regulator, announced the first phase of a major plan to tackle the nation’s record-breaking household energy debt. The debt—now a staggering £4.4 billion—has ballooned during the cost of living crisis, leaving more than one million households owing money to their energy suppliers without any repayment plan in place. The new initiative is set to wipe out up to £500 million of this debt for some of the country’s most financially vulnerable citizens.
The scheme targets nearly 200,000 people on means-tested benefits who accumulated over £100 in energy debt between April 2022 and March 2024. According to BBC, these individuals will not need to apply directly; rather, energy suppliers will automatically identify eligible customers using account and payment data. However, there’s a catch: to qualify for the write-off, customers must either make some effort to repay a portion of what they owe or, if unable to pay, accept support from an accredited debt advice charity. This could involve setting up a budget plan, attending advice sessions, or working with organizations like Citizens Advice or StepChange.
Charlotte Friel, Ofgem’s director for retail pricing and systems, described the situation as a “significant challenge.” She explained, “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.” The average household debt for those without a repayment arrangement now stands at an eye-watering £1,716, according to Ofgem’s latest figures. And it’s not just the indebted who are affected: unpaid bills are spread across all customers’ charges, increasing everyone’s energy costs.
How will this debt relief be funded? Every energy customer in Britain will bear a small part of the cost. Ofgem says the scheme will add roughly £5 to annual energy bills starting in 2027, on top of the existing £52 per year that households already pay to cover historic debt. The typical annual energy bill in the UK currently stands at about £1,755, so while the increase may seem modest, it’s still another addition to already high costs for many families.
Not everyone is happy with this funding approach. Eva Watkinson, Head of Campaigns at Debt Justice, criticized the decision to pass costs on to consumers rather than the energy network companies, which have recorded enormous profits in recent years. Watkinson told Debt Justice, “It is outrageous that energy network companies, which have made enormous profits, are not contributing to the cost of the debt write-off scheme. Instead, the cost will be added to consumers’ bills.” She continued, “This scheme must go hand in hand with actions to bring down energy bills, as prices remain sky-high.”
Calls for energy companies to shoulder more of the burden have come from other quarters as well. MPs on the Energy Security and Net Zero Committee have urged the government to use “excess profits” made by network firms to fund debt relief. Their recent report described it as “completely inexcusable” that households have been forced to choose between “heating and eating” while network companies enjoyed billions in profit. Committee chair Bill Esterson said, “British energy consumers are £4bn in debt, while network companies have made over £4bn in excess profits. These profits have come simply from outperforming price controls, even as millions of families ration energy or go without heat.”
Despite these criticisms, Ofgem has rejected suggestions to fund the scheme via network company profits, warning that renegotiating price controls could actually drive up consumer costs elsewhere. The regulator’s priority, it says, is to act quickly to alleviate the worst of the debt crisis while keeping the system fair for all billpayers.
Charities and consumer advocates have largely welcomed the move, albeit with caveats. Adam Scorer, chief executive of National Energy Action, told BBC’s Today programme, “We’ve been waiting a long time for some serious action to intervene on this astonishing level of household energy debt. It’s not enough, but it’s so great that we can see some serious attempt to shift this horrific burden off the shoulders of people who just cannot bear the weight.” Ned Hammond, from Energy UK (which represents suppliers), described the scheme as an “important first step,” but argued that it “would need to be expanded to meaningfully address the debt problem and reach a wider group of customers.”
Ofgem’s initiative is not a silver bullet. Even with £500 million of debt wiped out, the majority of the record £4.4 billion in arrears will remain. In fact, suppliers estimate that between £1.1 billion and £1.7 billion of historic industry debt comes from so-called “anonymous” occupier accounts—bills that pile up in unregistered properties until the new resident contacts a supplier. To tackle this, Ofgem is consulting on new rules that would require new tenants and homeowners to register their gas and electricity accounts immediately upon moving in. For homes already equipped with smart meters, the plan is to switch these meters to prepayment mode with limited credit, ensuring that residents have some power while they get their account set up. This approach, modeled on systems used in other countries, could help reduce future debt and protect vulnerable customers from being cut off entirely.
Energy debt in England, Wales, and Scotland rose by £750 million in just one year, Ofgem’s data reveals. The figures, covering April to June 2025, show the scale of the crisis and the urgency of interventions. The regulator hopes that its new measures—both the immediate debt relief and the longer-term reforms—will help bring down debt levels, protect the most vulnerable, and ease the cost burden on other billpayers. Still, as the cost of living crisis grinds on and energy prices remain high, many advocacy groups are pushing for broader and more systemic changes.
The roots of the current crisis are tangled in global events. Wholesale oil and gas prices soared after Russia’s invasion of Ukraine, as the West scrambled to wean itself off Russian imports and geopolitical tensions pushed prices even higher. Fossil fuel producers and network companies enjoyed record profits, while ordinary consumers saw their bills rise sharply. The resulting squeeze has left millions struggling to keep up with payments, and the effects are still being felt across the UK.
With the first phase of Ofgem’s debt relief scheme set to take effect in early 2026, the coming months will be crucial in determining whether these efforts can make a real dent in Britain’s energy debt mountain—or if further, more radical action will be needed to ensure no one is left behind in the cold.
