Energy bills could rise by £16 to help suppliers recover £3bn in debts

Households face paying an extra £16 on their energy bills under plans from regulator Ofgem to help suppliers recover customers’ bad debts.

New data published today shows energy debt has reached a record high of almost £3 billion, with many customers struggling to pay their bills amid record energy prices and rising costs in other areas.

To help suppliers recover their losses, Ofgem is proposing a one-off price cap adjustment of £16 – equivalent to around £1.33 a month – to be paid between April 2024 and March 2025.

Ofgem said: “We know that cost of living pressure is hitting people hard and this is evident in the increase in energy debt reaching record levels. However, the record level of debt means we must take action to make sure suppliers can recover their reasonable costs, so the market remains resilient, and suppliers are offering consumers support in managing their debts.”

It comes as households are already braced for a rise in bills from the New Year as Ofgem last month announced a 5% rise to the price cap from 1 January. 

If you’re struggling to pay, our help with gas and electricity bills article rounds up all the support available. And if you’re thinking of switching off the price cap, our energy comparison guide takes you through the latest fixed deals and what you need to know. 

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What is Ofgem proposing?

Ofgem says it’s consulting on this extra charge, as it’s concerned by the amount of ‘bad debt’ in the market – money owed by customers which is unlikely to be repaid. 

The £16 charge would be added to price-capped bills from April 2024 until March 2025, amounting to £1.33 a month. See Will energy prices go down? for the latest predictions on how the price cap is expected to fluctuate over the next year.

Under today’s proposals, those with prepayment meters would not be affected and would not have to pay any extra costs. This is because Ofgem says prepay customers do not build up the same level of debt as credit customers because they top up as they go.

Energy firms and consumers have until 17 January to submit any responses to these proposals.

‘There is a desperate need for the government to step in to help low-income households clear their debts’ 

Energy bills are already unaffordable for many, and most will be paying more than last winter with no repeat of the £400 government support all households got last year. 

Look After My Bills and other consumer groups and charities have been calling for the government to step in and help vulnerable households for some time. But this new debt data highlights how stark the issue is.

Fuel poverty charity National Energy Action said these Ofgem proposals will not solve the deeper issues households are facing.

Head of Policy at the charity, Matt Copeland, said: “Ofgem’s response, to increase prices further, may well be necessary. But it will only serve to increase debts and does not address the underlying issues.

“There is now a desperate need for the UK government to step in to help low-income households clear their debts and make sure bills are affordable.

“People are already going without energy, heat and light and it’s not enough to stop their debt rising. It’s going to be a bleak and cold Christmas for millions.”

What should I do if I need help with energy bills?

We’ve a full round-up in our energy bills support guide, but there are also several other government options out there that you may be eligible for.

It’s worth checking to see if you can qualify for them, because they may take some of the strain off your budget.

  • Warm home discount: a £150 discount on your winter energy bill if you meet certain criteria.
  • Cost of living payments: the first two instalments of £300 haves been paid, with the third payment of £299 due to be paid early next year.
  • Cold weather payment: pays £25 a week to people claiming certain benefits or other support when the average temperature in their area is zero degrees celsius or below over seven consecutive days.
  • Winter fuel payments: between £250 and £600 is available if you receive the state pension. How much you get depends on your age and circumstances.
  • Household support fund: your local council may be able to give you financial support. See who your local council is with this government portal.
It’s also worth checking out our how to use less gas and electricity article for simple ways to cut back on your use. 

What does Ofgem say?

Tim Jarvis, Director General for Markets, said: “We know that cost of living pressure is hitting people hard and this is evident in the increase in energy debt reaching record levels. We have taken steps to ensure energy firms are taking better care of customers and treating people struggling with debt fairly, through our robust consumer standards, and that companies are getting in touch to offer support, such as affordable payment plans, where needed.

“However, the record level of debt in the system means we must take action to make sure suppliers can recover their reasonable costs, so the market remains resilient, and suppliers are offering consumers support in managing their debts.

“The proposals set out today are not something we take lightly. However, we feel that they are necessary to address this issue. This approach will ensure the costs are recovered fairly, without penalising a particular group of customers.”