Ofgem publishes detailed proposals for the Debt Relief Scheme

Ofgem published detailed proposals on 6 November 2025 for how its Debt Relief Scheme (DRS) will work, alongside a statutory consultation on the licence changes needed to require suppliers to deliver it¹. The scheme is intended to provide one-time debt relief for households in genuine payment difficulty who accrued debt during the energy crisis¹.

Ofgem's latest published data shows domestic consumer energy debt reached £4.43 billion by June 2025, 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 says 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.

"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"

Under the proposals, phase 1 would support up to 200,000 consumers in receipt of means-tested benefits and reduce the debt stock by up to £500 million¹. Eligible debt is limited to that accrued between 1 April 2022 and 31 March 2024, the energy crisis period, with a floor of £100 on the level of eligible debt and a cap at the total value of a customer's eligible debt as it stands on the date of the consultation's publication². Phase 2 would target other households in payment difficulty who are not in receipt of benefits, where a robust approach to affordability assessment can be put in place¹.

Ofgem also set out separate work on debt built up during home moves. It says evidence from suppliers suggests this cohort may be responsible for between 20% and 40% of the overall debt figure, and that it will launch a consultation later in the year on proposals to trial new processes during home moves, requiring customers to contact their supplier to set up an account early in the process¹. Trials would focus on switching existing smart meters into prepayment mode where domestic customers move homes¹. Consumer Scotland, responding to that consultation in January 2026, said it tentatively supported Ofgem's early thinking but warned that if consumers face lengthy waits to contact a supplier, "the policy will be a failure and consumers will be exposed to unacceptable risks of self-disconnection"⁴.

On the cost of debt, Ofgem says a typical consumer currently 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. It says around 16% of customers pay by standard credit, and that 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.

Why it matters for households

The £52 figure is a cost carried by billpayers generally, not only by households in arrears, so the level of debt in the market feeds into what everyone pays¹. Ofgem's stated aim is to drive that figure down, but it says a number of interventions are needed to achieve it¹. For a household carrying crisis-era arrears, the proposals set out which debts could be written off, over what period they must have accrued, and what a customer must do to qualify. Ofgem proposes that customers take positive action to meet an engagement condition rather than suppliers discussing it with them, and that smart meter installation would not be a route to meeting that condition². It also proposes that prepayment customers should be eligible if they top up their existing consumption, and that direct debit customers with a live direct debit should be considered to be contributing to their consumption². Ofgem says it does not currently expect widespread or universal debt relief to be a permanent feature of this market beyond a response to exceptional events like the energy crisis¹.

What happens next

The statutory consultation closes on 18 December 2025, with a decision on the proposed licence changes expected in January 2026 and phase 1 delivery expected in early 2026, subject to feedback and to legislation allowing data sharing between the Department for Work and Pensions and suppliers². Ofgem says suppliers cannot begin using customer Warm Home Discount or means-tested benefits data until amendments to the Digital Economy Act 2017 come into force³. Networks are expected to begin monthly payments to suppliers from May 2027, with claims in subsequent years following from May 2028 and May 2029³.

Sources4 cited

1. Debt strategy update: supporting the reduction of energy debt | Ofgem, ofgem.gov.uk
2. Debt Relief Scheme: Statutory Consultation, ofgem.gov.uk
3. Delivery Guidance – Debt Relief Scheme, ofgem.gov.uk
4. Ofgem consultation on tackling energy debt when consumers move house (HTML) | Consumer Scotland, consumer.scot