Ofgem published its Impact Assessment for the proposed Debt Relief Scheme on 6 November 2025, setting out the estimated costs and benefits of the first phase of the scheme. The consultation closes on 18 December 20251.
The scheme is a targeted, time-limited intervention to write off energy debt and arrears built up during the energy crisis period from 1 April 2022 to 31 March 2024. Eligible customers are domestic customers identified as being on Means Tested Benefits who hold more than £100 of Eligible Debt at the point the scheme is implemented1.
Phase 1 is expected to address £0.905 billion in Eligible Debt across 706,000 customer accounts, writing off between £312.4 million and £472.9 million and benefiting between 280,000 and 400,000 accounts. Phase 2 is intended to cover the remaining accounts with Eligible Debt, valued at around £1.6 billion across approximately 1.7 million customer accounts, and will be subject to a separate assessment1.
Ofgem estimates total monetised benefits for Phase 1 at £44.1 million to £97.2 million, alongside non-monetary benefits such as improved wellbeing and reduced risk of self-disconnection. Costs, primarily supplier reimbursement for unprovisioned debt, administration and financing, are estimated at £91.8 million to £145.6 million. The net impact ranges from £5.5 million in benefits to £101.4 million in costs, equating to a bill increase of between £3.23 and £5.13 per dual-fuel household over one year only1.
"This corresponds to a net impact of Phase 1 ranging from £5.5 million in benefits to £101.4 million in costs, equating to a bill increase of between £3.23 and £5.13 per dual-fuel household over one year only."
Ofgem states that around 60% of eligible debt is held by households in the bottom three income deciles, describing the scheme as delivering progressive benefits. It also states that the scheme is designed as a one-off intervention to mitigate moral hazard, with engagement requirements and contribution elements intended to incentivise improved payment behaviours1.
| Measure | Phase 1 estimate |
|---|---|
| Accounts benefiting | 280,000 to 400,000 |
| Debt written off | £312.4 million to £472.9 million |
| Total monetised benefits | £44.1 million to £97.2 million |
| Total costs | £91.8 million to £145.6 million |
| Net impact | £5.5 million benefit to £101.4 million cost |
| Bill impact per dual-fuel household | £3.23 to £5.13, one year only |
On supplier costs, Ofgem estimates working capital cost savings of £5.4 million to £8.1 million, and a reduction in suppliers' administrative cost on collecting repayment of £8.6 million to £13.1 million per year. It estimates the cost per customer account at approximately £5 to £20 for those on the automatic route and £10 to £30 for those on the non-automatic route. Under the proposed Pay When Paid mechanism, suppliers will be reimbursed once networks recover the relevant charges, expected to occur in 20271.
Why it matters for households
The assessment sets out who would qualify for energy debt relief and what it would cost the wider customer base. Eligibility turns on receiving Means Tested Benefits and holding more than £100 of debt built up between April 2022 and March 2024, so households whose debt arose outside that window, or who are not on means-tested benefits, would not be covered in Phase 11.
The bill impact is presented as a one-off increase of between £3.23 and £5.13 per dual-fuel household over one year only, reflecting the cost of writing off debt that suppliers would otherwise recover through charges. Ofgem states that around 60% of eligible debt sits with households in the bottom three income deciles1.
For a household carrying crisis-period arrears, the scheme would remove that debt rather than reschedule it, which changes the starting point for repayment plans and for future energy bills. The assessment notes an estimated average recovery time for outstanding Eligible Debt of more than 22 months, and an average debt collection cost of 3 pence per £1 of debt and arrears1.
What happens next
The consultation response deadline is 18 December 2025. Ofgem states it will publish non-confidential responses alongside a decision on next steps. Phase 2 will involve a separate assessment process and a separate impact assessment before implementation1.
Sources1 cited
- Debt Relief Scheme, ofgem.gov.uk