Ofgem has set out its expectation that the Phase 1 special licence conditions (SLCs) for its Debt Relief Scheme (DRS) will come into force in January 2026, with Phase 1 going live in the first quarter of 20261. The scheme is intended to write off historic domestic energy debt built up during the energy crisis, and forms part of the regulator's wider debt strategy1.
The working paper builds on Ofgem's December 2024 policy consultation, "Resetting the energy debt landscape: the case for a debt relief scheme"1. Ofgem said it expected to publish a statutory consultation setting out detailed expectations for DRS delivery in September 2025, with responses to the working paper invited by 5pm on Friday 29 August 20251.
"Phase 1 SLCs come into force January 2026"
Under the proposed design, Phase 1 covers customers in receipt of means-tested benefits (MTBs), which Ofgem estimates to be approximately one third of all consumers eligible for the scheme1. Phase 2, covering all other eligible customers, is expected to go live in summer 20261. Both phases are expected to close to applications in the first quarter of 2027, with networks proposed to commence DRS payments from May 20271.
Eligibility criteria set out in the paper require a household to hold eligible debt of £100 or more, accumulated between 1 April 2022 and 31 March 2024, which Ofgem calls the "energy crisis period"1. Customers must also make some payment towards consumption in the billing period immediately before enrolment1. Ofgem estimates approximately 195,000 MTB customers will be targeted in Phase 1, of whom 175,000 are already engaged and 50,000 will need to engage further to receive support1.
| Phase | Timing | Eligible customers |
|---|---|---|
| Phase 1 | Q1 2026 | Customers in receipt of means-tested benefits |
| Phase 2 | Summer 2026 | All other eligible customers |
Source: Ofgem working paper1
The paper sets out three options for how much customers would be asked to contribute, with modelled figures for each1:
| Option | Customer contribution | Customer contributions | Debt repayment displacement |
|---|---|---|---|
| Option 1 | All | £15,000,000 | £85,000,000 |
| Option 2 | 33 | £5,000,000 | £95,000,000 |
| Option 3 | No | £0 | £100,000,000 |
Source: Ofgem working paper1
Ofgem said its modelling assumed a value for customer contributions and debt repayment displacement of 5%, and estimated an average overall effect of around 20% for every supplier1. The paper also proposes capping support at the total outstanding eligible debt at the point of statutory consultation publication1.
Why it matters for households
For a household carrying energy debt from the crisis period, the scheme as proposed would write off eligible balances directly on the customer account, rather than through a payment or credit1. The cap means the amount written off is fixed at the eligible debt held when the statutory consultation is published, so repayments made after that point reduce the support available1. Ofgem gives the example of a consumer with £2,000 total debt, of which £1,000 is energy crisis debt, who repays £1,500 before support is issued: the capped support would be £5001.
Engagement conditions mean customers already on a repayment plan or paying towards ongoing usage would automatically qualify for write-off on eligible balances, while disengaged customers would need to respond to supplier contact, provide basic information and engage with at least one additional support option1. The scheme is funded through network charges, distributed on a pay-when-paid basis1. The rules sit within the wider regulation and policy landscape for household energy supply.
What happens next
Ofgem said it expected to publish a statutory consultation in September 2025, and to update on its wider debt strategy in autumn 2025 alongside that consultation1. Phase 1 is expected to go live in Q1 2026, Phase 2 in summer 2026, with both phases closing to applications in Q1 2027 and network payments proposed from May 20271.
Sources1 cited
- Debt Relief Scheme (DRS): Policy update working paper, ofgem.gov.uk