Millions of British households are weighed down by record levels of energy debt, a crisis that has prompted urgent calls for government intervention and regulatory reform. On October 29, 2025, the Energy Security and Net Zero (ESNZ) select committee published the first part of its Cost of Energy report, laying bare the severity of the situation and recommending a suite of measures to ease the burden on consumers.
According to the committee’s findings, British energy consumers now owe more than £4 billion in debt and arrears—a figure that has more than tripled in just five years. Ofgem, the UK’s energy regulator, reported last month that household energy debt had surged to £4.43 billion, with over 2 million customers in debt and no repayment arrangements in place. The average debt owed by customers without a repayment plan has doubled since 2021, reaching £1,712 at the start of 2025. This collective debt is forcing households to pay up to an extra £145 annually on their bills to cover the shortfall, according to the ESNZ committee.
Committee chair Bill Esterson did not mince words in the report, stating, “British energy consumers are £4 billion in debt, while network companies have made over £4 billion in excess profits. These profits have come simply from outperforming price controls, even as millions of families ration energy or go without heat.” He added, “We’re calling on the Government to use these windfall profits to fund a lasting energy debt relief scheme, recognising the deep and enduring impact of the energy price crisis.”
The root causes of this crisis are complex. The UK’s energy affordability woes began in late 2021, driven by the reopening of economies after the Covid-19 pandemic and further exacerbated by Russia’s invasion of Ukraine. These shocks sent electricity and gas prices soaring, leaving both households and businesses struggling to keep up. The ESNZ committee’s report highlights that while consumers are grappling with these rising costs, energy networks have enjoyed windfall profits of around £4.15 billion from outperforming network price controls, as cited by Citizens Advice.
The committee’s recommendations are wide-ranging and, if implemented, could reshape the landscape for energy consumers. Key among them is a call for Ofgem to introduce an ambitious Energy Debt Relief Scheme, with consultation before spring 2026. The committee also urges the government to place the Energy Ombudsman on a statutory footing, arguing that without this, it remains “toothless” in protecting consumers. Other recommendations include setting the Energy Price Cap at an equal level for all customers, regardless of their payment method, starting in the first quarter of 2026, and establishing new targets for smart meter reliability by the end of 2025.
One particularly contentious issue is the role of standing charges—the fixed costs added to energy bills regardless of consumption. The committee describes these charges as a “regressive tax on energy access.” It recommends that customers who convert their homes to electric heating should be exempt from gas standing charges and that standing charges should never constitute more than 50% of money put onto a pre-payment meter. Ofgem should also limit the back-billing period to six months for customers with smart meters, a move designed to protect consumers from unexpected, and often unaffordable, charges.
Charities and advocacy groups have reported a sharp rise in people seeking help with energy billing issues. In the first nine months of 2024 alone, Citizens Advice assisted more than 52,000 people with such problems—an 83% increase since 2020. A quarter of these cases involved unexpected back bills, often in breach of Ofgem’s rules, and the average back bill has soared from £1,700 in October 2021 to more than £2,500 in 2024. Martin Lewis of MoneySavingExpert told the committee that there is a “systemic problem of a lack of enforcement of the back billing rules.”
Meanwhile, UK industrial electricity prices are now the highest in Europe and about four times higher than in the US and Canada. The committee warns that this puts UK businesses at a severe competitive disadvantage, leading to the closure of production facilities and the loss of high-paying, skilled jobs. While the government has announced support measures in its Industrial Strategy, the committee is concerned these do not go far or fast enough, with many businesses unlikely to survive until the new measures are introduced in 2027.
In response to evidence from the CEOs of the “Big Six” energy companies about the unregulated system of energy brokers for business customers—described as a “wild west”—the government has announced a crackdown on energy brokers to stamp out exploitation, echoing the committee’s concerns.
Ofgem, for its part, has acknowledged the challenges. A spokesperson explained, “This issue (the £4 billion windfall) arose due to very high levels of inflation in the early 2020s, unseen for 30 years, and we made clear to network companies that they should use this to strengthen their balance sheets to benefit consumers and support those who need it most.” The regulator added that it has since implemented changes to control costs and set tougher service targets, though it decided not to apply these changes retrospectively, citing the risk of additional costs to consumers.
On debt relief, Ofgem said, “We’re working at pace on plans to introduce a debt relief scheme that could help struggling households get back on track and rectify some of the debt that built up as a result of the crisis. Our engagement with stakeholders is ongoing to move this work forward.” Regarding standing charges, the regulator stressed, “The costs covered by the standing charge ultimately must be paid. They cover the costs of transporting energy to your home or business, and ensure we continue to invest in the networks, so they are future ready, and we have a stable and secure energy system.”
The Department for Energy Security and Net Zero also weighed in, stating, “We are delivering reforms that put consumers first, with stronger protections including automatic compensation when energy companies mistreat billpayers. We are working urgently with Ofgem to drive debt out of the energy system. To help people with the cost of living, this winter we are expanding the £150 Warm Home Discount to six million households.”
Not everyone agrees with the committee’s conclusions. Lawrence Slade, chief executive of the Energy Networks Association, argued, “The committee’s conclusions rely on narrow Citizens Advice analysis that doesn’t reflect the long-term nature of network investment. Ofgem has already reviewed this and confirmed that changing the current framework would not be in customers’ interests. Government needs to work with industry to identify a sustainable long-term solution for customer debt.” Slade also pointed out that Britain’s energy networks are investing over £100 billion between 2021 and 2031 to modernise the grid and support economic growth, with returns tightly regulated at around 5%.
As the debate continues, the committee plans to focus next on how costs like upgrading the grid and building new sources of energy generation are making up an increasing portion of household bills—and, crucially, how those bills might be reduced. With Ofgem unveiling plans to tackle a separate £1.7 billion anonymous energy debt pile, the coming months are likely to see further scrutiny and, perhaps, decisive action.
The energy debt crisis has exposed deep fissures in the UK’s energy system, pitting the urgent needs of consumers against the realities of industry investment and regulation. Whether the government and regulators will act swiftly enough to bring relief remains to be seen, but for millions of households, the stakes could hardly be higher.
