Key Highlights
- Ofgem plans to write off up to £500 million in historic energy bill debt.
- The move is expected to benefit approximately 195,000 individuals.
- Historic debts accumulated during the recent energy crisis will be targeted for relief.
- A final consultation on the first phase of Ofgem’s debt relief scheme will be published shortly.
Background on Energy Crisis and Debt Accumulation
The energy sector has faced significant challenges over the past few years, particularly during the recent energy crisis. According to figures released by Ofgem in June 2025, household energy bills surged to a new record high of £4.4 billion owed to suppliers in England, Scotland, and Wales. The average debt per household for those without repayment plans stands at approximately £1,716.
Regulatory Response: Debt Relief Scheme
The latest move by Ofgem is part of a broader effort to address the escalating issue of unpaid energy bills and the resulting financial strain on households. Henry Saker-Clark, an independent journalist, reported that Ofgem expects to write off up to £500 million in historic debt. This significant sum could potentially relieve approximately 195,000 individuals who are grappling with the financial burden of past energy debts.
Charlotte Friel, director for retail pricing and systems at Ofgem, explained that this initiative is aimed at directly reaching households while also making changes to how debt is managed in the sector. “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,” she stated.
Implementation of Debt Relief Measures
The first phase of Ofgem’s debt relief scheme is set to launch early next year. It will primarily focus on people in receipt of means-tested benefits with more than £100 of debt built up during the energy crisis. According to Friel, eligible households are expected to make some contribution towards their debts and current energy use or work with debt advice charities if unable to make payments.
Ofgem anticipates that in a worst-case scenario, between £1.1 billion and £1.7 billion of historic debt could be written off. This estimate is based on supplier estimates and highlights the severity of the financial burden shouldered by households during this period.
Broader Implications for Energy Sector
The announcement comes as MPs have called on Ofgem to pay down some of the energy debt through windfall profits on suppliers. The cost of unpaid debts will continue to be reclaimed across all household bills, adding an additional layer of financial pressure.
Charlotte Friel emphasized that these proposals aim to bring down existing debt and reform how it is managed in order to prevent future growth. “These changes will reduce the overall burden on households and ultimately lower energy costs,” she added.
The measures outlined by Ofgem are seen as a crucial step towards mitigating the financial strain caused by the energy crisis, which has affected millions of households across the UK. As the scheme moves forward, it is expected to provide much-needed relief while also setting a precedent for future regulatory actions in managing energy debts.
