Ofgem opened a consultation on 15 December 2023 proposing a one-off price cap adjustment of £16, equivalent to around £1.33 a month, to be paid between April 2024 and March 20251. The adjustment would allow suppliers to recover the costs of bad debt, which Ofgem defines as money owed in the energy system that is unlikely to be repaid1. Under the proposals, the extra costs would not be passed onto customers who use prepayment meters1.
Ofgem said new figures published the same day show energy debt has reached almost £3 billion, its highest ever level, which it attributed to sustained high wholesale energy prices and wider cost of living pressures1. In its notes to editors, the regulator said the £3 billion figure technically refers to "debt and arrears over 90 days due"1. It said the adjustment would ensure suppliers have resources to support customers in debt by setting up payment plans, writing off unmanageable debt case by case, and working out affordable repayment holidays1.
The consultation follows the introduction of new consumer standards, which Ofgem said came into effect officially on Thursday 14 December1. Those standards mean suppliers should offer debt repayment plans at the earliest opportunity and consider temporary debt repayment holidays where appropriate, improve ease of contact between customer and supplier, ensure contact centres are open at times that meet customer needs, and publish information on their Citizens Advice star rating1.
Tim Jarvis, Ofgem's Director General for Markets, said:
"The proposals set out today are not something we take lightly. However, we feel that they are necessary to address this issue. This approach will ensure the costs are recovered fairly, without penalising a particular group of customers."
Ofgem also published its decision not to adjust the price cap level based on variances in wholesale energy costs over Winter 22/23, considering that observed variances were more based on the risk management practices of individual suppliers than a systematic feature of the market as a whole1. The regulator said the price cap has fallen from £2,500 under the Government's Energy Price Guarantee in January 2023 to £1,928 in January 20241.
| Item | Detail |
|---|---|
| Adjustment | £16 one-off |
| Monthly equivalent | Around £1.33 |
| Period paid | April 2024 to March 2025 |
| Prepayment meter customers | Excluded |
| Energy debt reported | Almost £3 billion |
Why it matters for households
The £16 adjustment, if confirmed, would be recovered through the price cap over a 12-month period from April 2024, adding roughly £1.33 a month to the bills of credit customers. Prepayment meter customers are excluded, which Ofgem said reflects the fact that many PPM customers do not build up the same level of debt as credit customers because they top up as they go1. Where PPM debt does build up, Ofgem said it tends to be because customers have built up debt on other payment methods and are struggling with wider debt issues1.
The proposal shifts part of the cost of unpaid energy bills onto the wider body of bill-paying households, rather than leaving suppliers to absorb it. For a household's energy independence, the practical effect is a small, temporary addition to the unit rates or standing charge that make up the cap, at a time when the cap itself is falling. The cap remains a ceiling on unit rates and standing charges for a typical dual-fuel direct debit customer, not a limit on the total bill, so a home that uses more energy than the typical household pays more than the headline figure.
What happens next
The consultation is open and Ofgem said it welcomes all views on how these debts are recovered1. Ofgem said it is also looking at alternative policy responses to the debt issue beyond the price cap and will seek views from stakeholders in 2024 on approaches for dealing with bad debt1. As part of a separate wholesale consultation, it is asking for stakeholder views on future changes to the wholesale methodology and technical changes to the Annex 2 wholesale allowance model1. No date for a final decision on the £16 adjustment has been reported.