Ofgem confirmed on 25 February 2025 that it will extend the additional debt-related costs adjustment allowance, known as the Float, at its current level until the implementation of its operating costs review or until September 2025, whichever is sooner1. The decision follows a December 2024 consultation in which the regulator set out a minded-to position to extend the allowance1.
The allowance sits within the energy price cap and lets suppliers recover debt-related costs incurred above the permanent allowances already built into the cap. Ofgem introduced a temporary allowance in April 2024, initially set at £28 per typical dual fuel customer for 12 months, covering efficient additional debt-related costs incurred between April 2022 and March 20241. The regulator said the extension is intended to bridge the gap until a new enduring allowance for debt-related costs is introduced through the operating costs review, which is currently planned to be implemented from July 2025 at the earliest1.
"we have decided to maintain our consultation minded-to position to extend the Float at its current level until the implementation of the operating costs review or until September 2025, whichever is sooner."
Ofgem said its latest data shows total debt and arrears reached just over £3.8 billion in the third quarter of 2024, an increase of around £2 billion since the start of 20221. It said aggregated debt-related costs are trending down from their 2023 peak but remain materially above the level of existing permanent cap allowances, and that suppliers under-recovered costs by about £195 million between April and September 2024 under its hybrid benchmark approach1. Ofgem received eight responses from industry and one from a consumer advocate; all industry respondents supported extending the Float, while the consumer advocate opposed it, arguing there was no requirement for suppliers to use the allowances to clear consumer debt1.
| Item | Detail |
|---|---|
| Float allowance level | £31 per dual fuel customer |
| Original Float level | £28 per typical dual fuel customer |
| Original Float period | April 2024 to March 2025 |
| Extension runs until | Operating costs review implementation or September 2025, whichever is sooner |
| Operating costs review implementation | July 2025 at the earliest |
Why it matters for households
The Float is one of the components that sits inside the price cap, so its extension affects the level at which the cap is set rather than any single household's bill directly. Ofgem's stated aim is that prices reflect the efficient cost of supplying energy, including the cost of customer debt, much of which relates to supporting customers facing payment difficulty1. The regulator said the extension is intended to smooth the profile of the overall debt allowances within the cap, avoiding a step down in April 2025 followed by a step up in July 2025 at the earliest1. For a household, the practical effect is that a cost linked to unpaid bills across the market continues to be recovered through capped default tariffs rather than being removed and then reintroduced. Ofgem has separately consulted on whether there is a case for a debt relief scheme to support customers struggling to repay debt built up during the gas crisis; no decision on that has been reported1.
What happens next
Ofgem expects to implement the operating costs review later in 2025, which will set a new forward-looking allowance for debt-related costs and replace the temporary Float1. The extension runs until that implementation or September 2025, whichever comes first1. Ofgem said it will continue to monitor debt-related costs across industry and review any material and systematic change as part of a wider debt true-up review1.