Ofgem published a call for input on affordability and debt in the domestic retail market earlier in March 2024, with a response deadline of 10 May 20241. The regulator's discussion paper on the future of domestic price protection, published on 25 March 2024, states that the call for input was published "earlier this month" and confirms the same deadline1. National Energy Action (NEA), the fuel poverty charity, states that the call for input will close on 13 May 20242. The two dates have not been reconciled in the published material.
The call for input sits alongside Ofgem's wider work on price protection, including a discussion paper on the future of the default tariff cap, which also has a response deadline of 10 May 20241. That paper sets out options for reforming the cap, including whether it should remain flat or move to time-of-use pricing, whether it should remain universal or be targeted at specific groups such as those in vulnerable situations or on prepayment meters, and whether it should remain stringent or become market determined1.
"The price cap has worked well in maximising consumer protection and driving down supplier costs, but it needs to evolve as the retail market changes."
On debt levels, Ofgem confirmed that the average level of debt has increased by around 50% in the past 12 months, and the number of households in debt has increased by around 20%2. About two-thirds of the overall debt figure consists of arrears, defined as debt without a repayment arrangement, with the remaining third consisting of debt where a repayment arrangement is in place2. Energy debt and arrears in the GB domestic market now exceeds £3bn, a record high level3. Consumer Scotland reports that, for those with a repayment plan in place, average debts are £851, and for those with no repayment plan in place, average arrears are £1,7613.
The price cap fell to £1,690 for the typical dual fuel household paying by direct debit in April 20242. NEA states that under the previous calculation the price cap would have been announced as £1,769, and that the new level is 56% higher than the price cap prior to the beginning of the energy crisis, which was £1,1382. Ofgem confirmed that from April 2024 there will be a new allowance for bad debt, funded by temporarily adding £28 per year onto the typical bill, almost double the level the regulator originally consulted on3.
| Measure | Figure |
|---|---|
| Price cap, April 2024 | £1,6902 |
| Price cap under previous calculation | £1,7692 |
| Price cap before energy crisis | £1,1382 |
| Bad debt allowance on typical bill | £28 per year3 |
| Average debt with repayment plan | £8513 |
| Average arrears without repayment plan | £1,7613 |
Why it matters for households
The call for input concerns the rules that determine what households on default tariffs pay, and how suppliers recover unpaid bills. Ofgem's discussion paper notes that around 90% of households are now on the cap, up from around half before the energy crisis, but that this figure is starting to reduce1. It warns that as the retail market becomes more diverse, it will become increasingly challenging to set a stringent, universal and flat cap, and that customers facing the greatest affordability challenges, and those least able to benefit from flexibility, could end up paying higher prices1.
For a household's energy independence, the structure of price protection determines whether a home can reduce its bills by shifting consumption, for example by charging an electric vehicle overnight, or whether it pays the same unit rate regardless of when energy is used. Ofgem states that the introduction of Market-wide Half-Hourly Settlement from 2025 will enable this flexibility by exposing suppliers to the true costs of their customers' consumption patterns1. The regulator adds that it has not yet formed a view on the appropriate approach and that the paper is intended to stimulate debate1.
Consumer Scotland reports that 9% of households in Scotland are in energy debt on a broad definition that includes borrowing from friends or family or taking out loans to pay for energy bills3. Of those in energy debt, 20% reported debt recovery action in January and February 2024, compared to 10% in October 2023, and 17% reported being put on a prepayment meter as a result of their energy debt3. Almost half, 48%, of consumers in energy debt are not confident they will be able to clear their debt or arrears3.
What happens next
The response deadline for the call for input is given as 10 May 2024 by Ofgem1 and 13 May 2024 by NEA2. Ofgem states that once the response period is closed it will consider all responses and publish the non-confidential responses alongside a decision on next steps1. The discussion paper on the future of domestic price protection also has a response deadline of 10 May 20241. Ofgem states that the ban on acquisition-only tariffs has been extended for up to another 12 months1. Market-wide Half-Hourly Settlement is being rolled out over 18 months from spring 20251.
Sources3 cited
- Future of domestic price protection, ofgem.gov.uk
- National Energy Action (NEA) briefing on Ofgem’s Debt and Affordability Call for Input - National Energy Action (NEA), nea.org.uk
- Insights from latest Energy Affordability Tracker: Causes and impact of energy debt (HTML) | Consumer Scotland, consumer.scot