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A Debt relief scheme will tackle historical debt in the
system that adds to everyone's bills – phase one aims to cut
£500m from total.
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Other changes will help prevent debt building up to
these levels again, such as trials of new process for setting
up an energy account when you move into a new
home.
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Consumers will receive new guidance setting out their
rights and how suppliers must support them when they are
struggling with bills.
A scheme to tackle historical debt built up during the energy
crisis could help around 195,000 customers by writing off up to
£500m, Ofgem has announced today (Thursday 30 October
2025).
The regulator confirmed a final consultation on the first phase
of its Debt Relief Scheme (DRS) will be published shortly as part
of its plans to help consumers and support suppliers to bring
down £4.4bn of debt in the energy system.
The costs of recovering this debt, and in the worst case writing
it off, are spread across everyone's bills. That's why Ofgem is
moving forward with proposals that aim to bring debt down and
reform the way energy debt is managed to prevent it building up
again while protecting the most vulnerable.
Other steps include plans to trial changes to the process
households must follow when they move into a new property.
Currently when someone moves into a new home, energy accounts are
switched to ‘occupier'. Bills build up under these anonymous
accounts until the individual contacts a supplier to register.
This is in contrast to the way this process works in many other
countries across Europe, where consumers are required to set up
energy accounts to get on supply.
In the worst-case scenario this debt – which suppliers estimate
accounts for between £1.1 and £1.7bn (up to a third) of the
historic debt currently in the system - is never paid and is
written off. This is recovered via the debt allowance that is
included in everyone's bills, currently adding £52 under the
current price cap.
The proposals will include several safeguards to ensure
vulnerable consumers are protected, alongside measures to ensure
support is targeted at those who need it. This could include
adding credit to the smart meter when it is moved to prepayment
mode for new tenants or homeowners, which would ensure they
remain on supply while setting up an account with an energy
supplier.
Charlotte Friel, Director for Retail Pricing and Systems
at Ofgem, said:
“We know the growing amount of debt in the energy system is a
significant challenge – for those that are living with the
significant stress of being in debt, for households that
ultimately face higher costs on their bills to cover the debt
that can't be recovered, and for the industry that is limited in
its ability to innovate and invest because of the costs of
debt.
“We must protect consumers by striking the right balance between
making sure those that can pay are supported to do so, and
targeting support at those who need it most. These proposals will
both directly reach households and relieve the burden of
unmanageable debt, while also making changes to the way that debt
is managed in the sector.
“This is a challenge that requires us all to work together across
industry and government to deliver a fairer system that works for
current and future consumers.”
Further changes from the regulator also include a new ‘Know your
Rights' document for consumers setting out what suppliers must do
to support households struggling with debt, and a Code of
Practice to improve processes and collaboration between suppliers
and debt advice providers.
The first phase of the DRS, expected to launch in early 2026,
will focus on people in receipt of means-tested benefits with
more than £100 of debt built up between during the energy crisis
(April 2022 – March 2024).
Eligible households will be expected to be making some
contribution towards their debt or ongoing energy use, or if they
are unable to do so at this time, be willing to work with a debt
advice charity to seek help managing their debts. They would also
be identified automatically and contacted by
suppliers.
The regulator will publish consultations on the proposals in the
coming weeks, with the aim of the DRS being implemented early
2026.
ENDS
Notes to editors
- Policy documents will be published in full in the coming
weeks.
