The Energy Debt Relief Scheme

The Energy Debt Relief Scheme is a one-off, government-backed programme to write off domestic gas and electricity arrears built up during the energy crisis. It is aimed at households in genuine payment difficulty who accrued debt between 1 April 2022 and 31 March 2024, and it is delivered by energy suppliers under licence conditions administered by Ofgem¹.

The scheme is being run in two phases. Phase 1 covers domestic customers on means-tested benefits who hold £100 or more of eligible debt, identified by data matching with the Department for Work and Pensions. Ofgem expects Phase 1 to benefit between 280,000 and 400,000 accounts, writing off between £312.4 million and £472.9 million, and to address £0.905 billion in eligible debt across 706,000 customer accounts¹. Phase 2 is intended to cover the remaining accounts, with around £1.6 billion of eligible debt across approximately 1.7 million customer accounts¹.

The money is not a grant paid to households. Suppliers apply a DRS Adjustment to reduce the balance, then claim the cost back through network charges, which are recovered from domestic customers from charging year 2027/28². The scheme closes to applications on a set date in Q1 2027, with final claim submissions in Q3/Q4 2028³.

What the Energy Debt Relief Scheme is and who it is for

The DRS is a debt write-off programme, not a payment. Its stated purpose is to provide one-time debt relief for households in genuine payment difficulty who accrued debt during the energy crisis, and to reduce the debt stock by up to £500 million¹. Ofgem's earlier case for the scheme described the intention as forgiving debt or a portion of debt of eligible customers, and/or providing debt matching to crowd in customer debt repayments⁵.

Eligible debt is defined narrowly. It means debt and arrears, monies owed to a licensed energy supplier for charges in relation to the licensed supply of gas and electricity, which built up during the eligible period and is still outstanding¹. Debt and arrears are treated as outstanding where they have been unpaid for at least 91 days¹. The eligible period is the energy crisis window of 1 April 2022 to 31 March 2024¹.

The scheme is not open to everyone with arrears. It is targeted at domestic customers on means-tested benefits in Phase 1, and at customers genuinely unable to repay in Phase 2. Ofgem's impact assessment sets out that eligible customers are those domestic customers identified as being on means-tested benefits who hold more than £100 of eligible debt at the point the scheme is implemented¹.

For a household, the practical effect is that a historic crisis-era balance can be removed rather than repaid over years. Ofgem's own estimate is that the average time to recover outstanding eligible debt is more than 22 months, which is the recovery burden the scheme is designed to short-circuit¹.

Eligibility: the £100 threshold, the eligible period and means-tested benefits

Three conditions do most of the work: the size of the debt, when it was built up, and the household's benefit status.

The debt floor is £100. Ofgem's statutory consultation states that a floor of £100 on the level of eligible debt is appropriate, and the working paper describes the criteria as domestic customers or households with £100 or more of debt². The eligible period is fixed: debt accumulated between 1 April 2022 and 31 March 2024, the energy crisis period².

The benefit test in Phase 1 draws on the same means-tested benefits used across other energy support schemes. The ECO4 eligibility list, which is the closest published enumeration, covers Child Benefit (with income thresholds), Pension Credit (Guaranteed or Savings Credit), income-related Employment and Support Allowance, income-based Jobseeker's Allowance, Income Support, Child Tax Credit and Working Tax Credit, Universal Credit, and Housing Benefit⁶. Ofgem's own working paper confirms the Phase 1 group as customers in receipt of means-tested benefits, identified through data matching with DWP data, who meet the eligibility criteria and the engagement condition³.

Legislation enabling the use of means-tested benefits data for energy debt relief must be in place for DWP data matching to be used, and the working paper puts that legislation coming into force in December 2025 to January 2026 under the Digital Economy Act 2017².

Phase 1 and Phase 2: who is covered in each

The two phases use different eligibility machinery and run on different clocks.

Phase 1 targets customers in receipt of means-tested benefits, identified through data matching with DWP data, who meet the eligibility criteria and the engagement condition³. Ofgem estimates this phase will cover approximately one-third of all customers with eligible debt³. Suppliers are expected to deliver this phase in the first half of 2026, once licence changes come into force and the DWP data matching legislation has passed, subject to Parliamentary approval³.

Phase 2 targets customers with eligible debt who are genuinely unable to repay but are not in receipt of means-tested benefits, identified through a standardised and enhanced income and expenditure assessment³. The working paper puts Phase 2 timing at summer 2026, covering all other eligible customers². Ofgem's earlier consultation had proposed an alternative eligibility path involving consumer groups and charities, the application route, as a way of reaching households the benefit data would miss⁵.

The scale difference matters. Phase 1 addresses the smaller share of the debt but reaches households whose circumstances are already verified by the benefit system. Phase 2 carries the larger balance and depends on an assessment of means that suppliers must apply consistently, which is why Ofgem describes it as standardised and enhanced³.

The automatic route and the engagement condition

The scheme does not write off debt for households that have stopped paying altogether. Engagement is a condition, and it takes specific forms.

Customers on means-tested benefits who are already engaged, such as those on a repayment plan or paying towards ongoing usage, automatically qualify for debt write-off on eligible balances². The automatic route criteria are that the customer holds eligible debt of £100 or more, is identified as being in receipt of means-tested benefits, and has made a payment in the billing period immediately prior¹.

For customers who are not engaged, Ofgem sets out three alternative engagement routes: adoption of a repayment plan, payment through Fuel Direct, or referral to a debt advice service⁴. The working paper describes the requirement for disengaged means-tested benefit customers as responding to supplier contact, providing basic information, and engaging with at least one additional support option such as a repayment plan, a smart meter installation, the Fuel Direct Scheme or a signpost to a debt advice service².

The payment test is deliberately light. The statutory consultation states that the criteria is met if a customer has made a payment during their most recent billing period, whether monthly, quarterly or otherwise depending on the supplier's billing approach³. The payment is towards current usage, not the historic eligible debt.

The Fuel Direct route is a long-standing mechanism: paying towards energy bills directly out of a range of benefits where the claimant is in debt and having difficulties budgeting, and it is not intended as an alternative to energy prepayment meters⁷.

How much debt could be written off: the scale of the scheme

The published figures describe a scheme of substantial but bounded size, and the range across documents reflects how the design changed between consultation stages.

Ofgem's December 2024 case for a scheme estimated that it could write off £0.5 to £1 billion⁵. The November 2025 impact assessment narrows Phase 1 to between £312.4 million and £472.9 million, benefiting between 280,000 and 400,000 accounts¹. The same document puts Phase 1 eligible debt at £0.905 billion across 706,000 customer accounts, and Phase 2 eligible debt at around £1.6 billion across approximately 1.7 million customer accounts¹.

The gap between eligible debt and write-off is explained partly by prior recovery. Ofgem's earlier consultation expected around £400m of the debt due to be written off under a debt relief scheme to have been recovered already, assuming previous debt allowances were equally distributed⁵. In other words, some of the eligible balance has already been paid down or provided for, so the write-off is smaller than the stock.

There is also a cap. The statutory consultation retains a cap on the amount of debt relief available to each individual customer at the total value of their eligible debt as it stands on the date of the consultation's publication³. The working paper states the same principle: capped at total outstanding eligible debt at the point of statutory consultation publication².

The scheme is also expected to change payment behaviour. The impact assessment estimates benefits of £4 million to £11.2 million over a three-year period in 2025's price level for all engaged eligible households¹.

How the scheme is funded and what it adds to bills

The DRS is funded by network companies and recovered through network charges, a financing option Ofgem consulted on alongside recovery through a price cap allowance, supplier voluntary contributions, and debt matching with customer contributions⁵. The working paper confirms the chosen mechanism: using network distribution charges to collect and distribute funds for a one-off debt relief scheme².

The recovery method is split by fuel. Ofgem proposes to recover DRS costs from domestic customers via standing charges for electricity customers and volume charges for gas customers². Networks would recover DRS costs through higher network use of system charges from charging year 2027/28². Payments commence at the start of the 2027/2028 charging year, with the first DRS payments from networks to suppliers occurring in May 2027³.

The statutory consultation proposes a one-year payment and recovery period³. The delivery guidance sets out three claim periods: Q3/Q4 2026 with recovery in 2027/2028, primarily for Phase 1 costs; Q3/4 2027 with recovery in 2028/2029, primarily for Phase 2 costs; and Q3/4 2028 with recovery in 2029/2030, acting as a mop up for any missed costs⁴.

This is the dependence the scheme creates. The write-off is real for the household that receives it, but the cost is socialised across all domestic customers through network charges, and it lands on bills from 2027/28 onwards. The scheme does not reduce the total cost of the energy crisis debt; it moves who pays it and when.

How suppliers claim and how Ofgem decides

Delivery is by suppliers, with administration and oversight by Ofgem, which the statutory consultation confirms remains the preferred delivery approach³. Only suppliers that are obligated under the DRS and that have passed the DRS Phase 1 Readiness Assessment can make a claim⁴.

The claims process closely aligns with the approach used in the Supplier of Last Resort levy claims framework, with suppliers submitting claims to Ofgem and presenting validated claims to network operators for payment⁴. Claims must be submitted via Huddle, a secure file-sharing platform, using an Excel template, and claims not in the correct format must be resubmitted⁴. Claims must only include costs that have already been incurred; projected or future costs are not eligible⁴.

Suppliers can claim for costs associated with debt write-off and administrative costs, with Ofgem assessing whether claimed costs represent value for money⁴. A flat administration cost is applied to each customer supported under the scheme⁴. Claims must include the number of customers supported and the monetary value of support, summarised by fuel type and disaggregated by payment method and account type⁴.

The final decision on all claims rests solely with Ofgem, though suppliers may meet Ofgem and submit further evidence for reconsideration⁴. Where Ofgem is not satisfied with any aspect of a claim, it will adjust or reject specific items rather than rejecting the whole claim, and may revise or reject a claim entirely where evidence is insufficient⁴. Ofgem takes a zero-tolerance approach to fraud, and suppliers must mitigate fraud risk with senior manager oversight, accurate reporting processes and processes for handling suspected fraud, whistleblowing and allegations⁴.

Suppliers provide monthly reporting on the number of Phase 1 customers engaged through the scheme, and Ofgem may request an end-of-scheme report following closure⁴. The supplier must retain an audit trail for DRS Adjustment made to customers, and Ofgem may request that a supplier commissions an independent audit where it identifies a risk to customer outcomes⁴.

Timetable: launch, application window and scheme closure

The timetable has moved since the scheme was first proposed, and the published dates now run from late 2025 through to 2030.

The December 2024 consultation proposed a scheme opening period of summer/autumn 2025 to spring 2026, with decisions expected in late spring 2025 and implementation targeted at summer/autumn 2025⁵. The November 2025 documents set a later and firmer sequence. DWP data matching legislation comes into force in December 2025 to January 2026, and Phase 1 standard licence conditions come into force in January 2026². DRS licence changes come into force in Q1 2026³.

Phase 1 launch, when suppliers begin applying DRS adjustments to accounts, is early 2026, once licence changes come into force and the DWP data matching legislation has passed, subject to Parliamentary approval³. Suppliers are expected to deliver Phase 1 in the first half of 2026³. The first Phase 1 claim submission round is Q3/4 2026, with the first Phase 1 claim payment from networks to suppliers in Q2 2027³.

The scheme closes to applications on a set date in Q1 2027³. The working paper puts Phase 1 and Phase 2 close to applications at Q1 2027, with a wind-up period of early 2027 to mid 2027². The delivery guidance indicates the scheme is expected to close after final claim submissions in Q3/Q4 2028⁴.

How the DRS interacts with other debt and hardship schemes

The DRS sits alongside a crowded landscape of energy debt and efficiency support, and the boundaries between them are set out in the delivery guidance.

The clearest rule is that the DRS Adjustment should not be used to meet any other obligation, including debt write-off offered under the Industry Initiatives component of the Warm Home Discount⁴. The two cannot be stacked on the same debt.

Beyond that, the schemes do different jobs. The Warm Home Discount helps households in, or at risk of, fuel poverty with direct energy bill payments as well as other financial and energy-related support, and it is funded through a levy on all domestic gas and electricity customers⁸. The Energy Company Obligation is an energy supplier led energy efficiency scheme in England, Scotland and Wales designed to tackle fuel poverty and help reduce carbon emissions, focused on supporting low-income households, and it supports energy efficiency measures in the home of those considered to be in fuel poverty⁹. ECO helps make homes more energy efficient by installing improvements free of charge to eligible households¹¹.

The distinction matters for a household's position. The DRS removes a historic balance; ECO and similar schemes reduce future consumption. A household that receives a write-off but remains in a hard-to-heat home has not changed its underlying exposure to prices.

Charitable support continues in parallel. The British Gas Energy Trust is a registered charity that helps individuals and families in poverty, suffering or other distress who are struggling to pay their gas and/or electricity debts¹². Supplier funds operate on their own terms: the EDF Customer Support Fund requires applicants to show commitment to financial stability by making regular payments for ongoing energy usage, and once an application for debt support is successful a payment plan is agreed and any debt activity is suspended¹³.

For households in Northern Ireland, the support landscape is separate. A Northern Ireland energy bill reduction scheme is being paid for through £81 million in funding¹⁴.

What the scheme means for household energy independence

The DRS addresses the consequence of dependence rather than the dependence itself. It clears a balance owed to a licensed supplier, which restores a household's ability to switch, to move to a cheaper payment method, or simply to stop servicing a historic debt out of current income. That is a real gain in control.

What it does not change is the underlying position. The household remains connected to a licensed supplier, buying gas and electricity at prices set by the market and the price cap, and the cost of the write-off is recovered from all domestic customers through network charges from 2027/28². The scheme is funded by network companies and recovered through network charges, one of several financing options Ofgem considered⁵. The money comes from the same customer base that carries the debt.

The scheme also leaves the physical causes of arrears untouched. Energy Company Obligation measures support energy efficiency in the homes of those considered to be in fuel poverty, and the Domestic Renewable Heat Incentive is a government financial incentive to promote the use of renewable heat⁹. Those schemes reduce consumption and exposure to prices; the DRS does not. A household that clears its crisis-era debt but still lives in a poorly insulated home remains exposed to the next price shock.

There is a timing dependence too. The write-off is applied by the supplier, but the supplier is reimbursed by network operators from May 2027, and the cost reaches bills from charging year 2027/28². Until then, the household's relief depends on the supplier's readiness assessment, its claim being validated, and Ofgem's decision on that claim, which rests solely with Ofgem⁴.

The honest summary is that the DRS is a one-off correction of a specific historic problem. It restores a household's standing with its supplier. It does not make the household independent of the grid, the supplier, the gas network or the price of energy, and it does not prevent the same debt arising again if prices rise faster than income.