United Kingdom (Parliament Politics Magazine) – Thousands of UK households on means-tested benefits with energy debts over £100 accrued between April 2022 and March 2024 could have up to £500 million of debt cancelled under a new relief scheme announced by Ofgem. This measure aims to support vulnerable consumers while spreading the cost to other billpayers.
Ofgem Announces Energy Debt Relief Scheme
As reported by David Wilkinson of BBC News, the energy regulator Ofgem has revealed plans to write off up to £500 million of unpaid household energy bills for qualifying recipients on means-tested benefits. The scheme targets individuals who have accrued energy debt exceeding £100 between April 2022 and March 2024.
Under the scheme, energy suppliers will identify customers who qualify. These customers must make some contribution toward their outstanding debt or cover the cost of their ongoing energy usage to benefit from the write-off. Those unable to contribute will need to seek assistance from a debt charity.
Scale of Energy Debt and Rising Costs
Ofgem’s data shows energy debt in the UK has reached a historic £4.4 billion as of mid-2025, marking an increase of £750 million in just one year, reflecting persistently high energy prices. Over one million households currently have energy debts without a repayment plan, intensifying pressure on vulnerable groups.
In addition to debt relief measures, energy bills remain costly for many. The average household on a price-capped tariff spends approximately £1,755 annually on energy, which includes £52 directed toward recovering past debts. The price cap is expected to rise by 6.4% in April 2025, adding an estimated £159 to average bills.
Eligibility and Conditions for Debt Write-Off
The scheme’s first phase, expected to begin early 2026, concentrates on those receiving means-tested benefits, such as Universal Credit. Eligible customers must have built up debts greater than £100 over the two-year period. Those already engaged in repayment plans will automatically qualify for debt cancellation on eligible balances.
For recipients currently disengaged from repayment discussions, engagement with suppliers—such as responding to contact and providing relevant information is required to access assistance. This dual approach aims to encourage active repayment efforts while protecting the most financially vulnerable.
Adam Scorer, Chief Executive of National Energy Action, praised the initiative, saying,
“It’s hugely positive that many more low-income households on means-tested benefits will receive direct support tackling unaffordable bills and historic energy debts this winter”.
Broader Government and Industry Context
The UK government complements these regulatory efforts with programmes such as the Warm Home Discount, extended to cover six million households receiving £150 off their energy bills in winter, targeting low-income families to ease energy cost burdens.
David Buttress, CEO of energy provider OVO, welcomed the relief measures, calling them
“a step in the right direction,” focusing aid on households most in need. Meanwhile, Andrew Sissons from Nesta underlined the importance of targeting support to make energy bills “fairer and more affordable”.
With energy costs increasing faster than earnings or benefits, these interventions seek to strike a balance between assisting vulnerable households and managing the cost recovery across the wider customer base.
Financial Impact and Cost Recovery
While the debt relief scheme aims to reduce customer arrears significantly, the £500 million write-off cost will be recouped through a roughly £5 increase on average annual gas and electricity bills for all households, effectively spreading the financial impact across energy consumers.
This approach may slow but not fully reverse the rise in energy debt, necessitating ongoing strategies to manage affordability and debt culture in the sector, as outlined in Ofgem’s wider Debt Strategy working papers.
Outlook and Next Steps
Ofgem plans to consult further stakeholders and publish detailed implementation expectations for the Debt Relief Scheme by the autumn of 2025, with Phase 1 rollout scheduled for early 2026. Phase 2 will extend relief options to other eligible customers beyond benefit recipients later in the year.
Martin Jones of Ofgem noted:
“This scheme is a vital part of our commitment to ensure vulnerable consumers receive necessary support while maintaining a fair and sustainable energy market”.