Ofgem published its Debt Strategy

Ofgem published its Debt Strategy in December 2024, setting out plans to reset the historic debt built up during the energy crisis, raise debt standards for domestic consumers and reform how debt is managed to prevent it building up again¹. The regulator said the strategy has three aims: targeting support at those who need it most, controlling access to credit, and incentivising customers to pay their bills¹.

The scale of the problem has continued to grow. By June 2025, domestic consumer energy debt had reached £4.43 billion, an increase of 20% from the same time in 2024 and 71% since 2023¹. Nearly three quarters of that debt is with customers who have no repayment plan in place, known as arrears¹. Ofgem said the number of households in debt has not risen dramatically over the same period, suggesting a significant part of the challenge is with a proportion of consumers going deeper into debt¹.

The centrepiece is the Debt Relief Scheme. Ofgem said phase 1 is expected to support up to 200,000 consumers in receipt of means-tested benefits and reduce the debt stock by up to £500 million¹. A phase 2 would support other households in payment difficulty who are not in receipt of benefits, where a robust approach to affordability assessment can be put in place¹.

"we move forward today (Thursday 6 November 2025) with detailed proposals on how our Debt Relief Scheme (DRS) will work to provide one-time debt relief for households in genuine payment difficulty, who accrued debt during the energy crisis"

Debt costs are shared across all billpayers. Ofgem said a typical consumer pays around £52 per year towards the cost of managing and writing off energy debt, based on an average household on a standard variable tariff paying by direct debit, and that this may be higher for some households depending on how they pay¹. The regulator said a key aim of its debt work is to drive that figure down¹.

Ofgem has also identified the home-move process as a target area. Evidence from suppliers suggests this cohort may be responsible for between 20% and 40% of the overall debt figure¹. Around 16% of customers pay by standard credit, and research suggests up to 43% do not realise this is the most expensive way to pay, with a £135 price premium specifically due to the costs of debt¹.

Separately, Ofgem published a refreshed Consumer Vulnerability Strategy on 15 April 2025, following consultation that drew 67 responses². It said the Debt Strategy sits within that wider work, alongside the proposed Debt Relief Scheme, debt standards and energy affordability work with government². The Consumer Vulnerability Strategy records that by the end of September 2024, individuals in arrears without a repayment plan owed an average of £1,568 for electricity and £1,324 for gas².

Why it matters for households

Energy debt is not only a problem for the households that owe it. Ofgem allows suppliers to recover a proportion of debt costs from all billpayers, including administrative expenses, working capital and the portion of debt that ultimately cannot be recovered¹. That is why the £52 figure appears on bills regardless of whether a household is in arrears, and why reducing the debt stock is presented as a route to lower costs for everyone¹.

For a household already in arrears, the strategy sets out expectations on how suppliers assess ability to pay and put customers onto sustainable repayment plans, and a "Know your Rights" guide setting out how domestic customers can expect to be treated when struggling to pay¹. The Energy Debt and Repayment Plans guide covers how repayment arrangements work in practice, and the Energy Debt Relief Scheme page tracks the one-time relief scheme itself. For households that have never missed a payment, the practical relevance is the debt component inside the price cap and the wider question of what energy bills mean for energy independence.

What happens next

Ofgem said it will launch a consultation later in 2025 with proposals to trial new processes during home moves, requiring customers to contact their supplier to set up an account early in the process¹. Those trials would focus on switching existing smart meters into prepayment mode where domestic customers move homes¹. Ofgem also said it is working with government on access to means-tested benefits data to help suppliers identify eligible customers proactively¹, and that it welcomes the government's expansion of the Warm Home Discount and proposals to continue the scheme once the current scheme ends in March 2026¹. Further reforms to Additional Support Credit will be considered as part of a wider review of access to credit, with timings not yet set out¹.

Sources2 cited

1. Debt strategy update: supporting the reduction of energy debt | Ofgem, ofgem.gov.uk
2. Consumer Vulnerability Strategy, ofgem.gov.uk