The UK energy regulator Ofgem has unveiled a new package of measures aimed at reducing a record £4.4 billion in household energy debt, proposing a partial write-off and procedural reforms designed to prevent arrears from escalating further.
According to Ofgem, around 195,000 customers could benefit from the initiative, which will see up to £500 million of historical debt written off. The scheme’s first phase, expected to launch in 2026, will target households receiving means-tested benefits that have accrued more than £100 in arrears between April 2022 and March 2024.
The regulator said energy debt is now equivalent to roughly £52 per household per year — about 3 % of the average dual-fuel bill under the current price cap of £1,755. The sharp rise in arrears has been attributed to sustained high energy costs since 2022 and the long-term financial impact of the global gas-price crisis.
“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,” said Charlotte Friel, Director for Retail Pricing and Systems at Ofgem.
The proposed plan is part of a broader review of how energy suppliers manage customer debt and transitions when occupants move house — a process Ofgem said has too often resulted in “anonymous accounts” leaving unpaid balances behind. Under the new approach, the regulator will require suppliers to adopt clearer account-linking mechanisms to ensure debts remain traceable to the correct customer.
While the £500 million write-off has been broadly welcomed by consumer advocates, questions remain over its funding. Ofgem has not yet specified whether the debt relief will be financed directly by suppliers, offset through the price cap, or supported by government intervention. Industry observers warn that if suppliers absorb the cost, it could still filter through to non-debtor households in the form of higher standing charges.
Consumer groups such as Citizens Advice and the End Fuel Poverty Coalition have urged Ofgem to pair the relief with longer-term affordability measures, citing energy prices that remain around 50 % higher than before 2021. Both organisations argue that while debt write-offs can relieve immediate hardship, they do little to address structural inequities in the energy market — particularly for low-income households facing ongoing cost-of-living pressures.
The regulator has emphasised that its next steps will include consultation with suppliers, charities, and government departments before the scheme’s final design is confirmed. A follow-up set of measures on prepayment meters and debt prevention is also expected early next year.
Although energy prices have eased since their 2023 peak, Ofgem’s data show that arrears have continued to climb, reflecting what the regulator describes as “persistent affordability stress” in British households. The forthcoming debt-relief scheme represents the first attempt to tackle the issue at scale, balancing short-term consumer protection with the long-term sustainability of the retail energy market.
