Boost for UK households as £500 million energy bill debt to be written off
Up to half a billion pounds of household energy bill debt will be written off as part of a new aid plan, the energy regulator has announced.
Energy watchdog Ofgem plans to “reset and reform” the UK’s mounting energy debt; It’s a burden that’s currently adding pressure to all household bills.
Under the current price cap, an annual charge of £52 is charged as a debt allowance on household energy bills and is designed to cover outstanding energy debts that are ultimately written off.
The regulator envisages writing off up to £500 million of historic debt accumulated during the last energy crisis; This measure is expected to benefit approximately 195,000 people.
The regulator confirmed that the final consultation on the first phase of the debt relief plan will be published shortly.
Figures published by Ofgem last month showed that the money owed to suppliers by households in England, Scotland and Wales reached a new record of £4.4bn at the end of June.
The average debt for people without a repayment plan with their provider currently stands at around £1,716 per household.
Ofgem said supplier estimates suggest that in a worst-case scenario, between £1.1bn and £1.7bn of historic debt has never been paid and will be written off.
It comes just a day after MPs called on the regulator to pay some of the energy debt bill through windfall profits from suppliers.
However, the cost of unpaid debts will continue to be covered by collecting them from the bills of all households.
Ofgem said it was moving forward with proposals to reduce debt and reform the way these debts are managed to prevent them from rising so high in the future, thereby reducing the cost to all households.
Ofgem’s other recommendations include plans to trial changes to the process households should follow when moving to a new property.
Charlotte Friel, director of retail pricing and systems at Ofgem, said: “We know that the increasing amount of debt in the energy system is a significant challenge.
“We must protect consumers by striking the right balance between ensuring those who can pay are supported and targeting support to those who need it most.
“These suggestions will both alleviate the unmanageable debt burden by reaching households directly and make changes in the way debts are managed in the sector.”
The first phase of the programme, set to launch early next year, will focus on people on means-tested benefits with debts of more than £100, accumulated during the energy crisis.
Eligible households will be expected to contribute something towards their debt and current energy use, or work with debt advice charities if they can’t make payments, it added.
