Around 200,000 people on benefits could get energy debt cancelled

Nearly 200,000 people on benefits could have their energy debt cancelled, under Ofgem plans that could come into force early next year. If the scheme goes ahead, around £500 million worth of energy debt could be written off.

Why has Ofgem proposed the scheme?

Right now, people in the UK owe a huge amount of money to energy companies; about £4.4 billion. That’s money from unpaid gas and electricity bills.

Even if you’ve never missed a payment, this affects you. That’s because energy companies spread the cost of unpaid bills across everyone’s bills. At the moment, this adds £52 a year to the average household bill.

What’s Ofgem doing?

Ofgem wants to fix this issue by:

• helping people who are struggling the most
• stopping debt from building up again
• making the system fairer for everyone

They’ve proposed a Debt Relief Scheme that could wipe out up to £500 million of energy debt. This would help around 195,000 energy customers.

Who could get help?

To qualify for the first phase of the scheme, you must:

• be on means-tested benefits (like Universal Credit or Pension Credit)
• have more than £100 of energy debt built up between April 2022 and March 2024

If you’re eligible, your energy supplier will contact you directly. You won’t need to apply.

You’ll be expected to:

• pay something towards your current energy use or debt
• or, if you can’t afford that, get help from a debt advice charity like Citizens Advice or StepChange

The scheme is expected to start in early 2026.

Will this cost me more?

Yes, but only a little. To pay for the scheme, Ofgem plans to add about £5 a year to everyone’s bills starting in 2027. That’s much less than the current £52 added to cover unpaid debts.

What happens when you move home?

Ofgem also wants to change how energy accounts work when people move house.

Right now, when someone moves in, the energy account is listed under “the occupier.” Bills start piling up until the new resident sets up an account. This can lead to unpaid bills and more debt.

Ofgem wants to switch to a system like in other European countries, where you must set up an account before getting energy. This could stop debt from building up under anonymous accounts, which currently adds £1.1 to £1.7 billion to the total debt.

Extra help for vulnerable people

Ofgem is also planning:

• a “Know Your Rights” guide to explain what energy companies must do to help people in debt
• a new Code of Practice to make sure suppliers and charities work together better
• adding credit to smart meters when they’re switched to prepayment mode, so new tenants don’t lose power while setting up their account

What can I do if I’m struggling now?

If you’re finding it hard to pay your energy bills, here are some things you can try:

• get temporary credit if you’re on a prepayment meter
• apply for grants or hardship funds from your energy supplier
• join the Priority Services Register for extra support (especially if you’re elderly, disabled, or have young children)
• check you’re getting all the benefits you’re entitled to through a benefits calculator

Here at thinkmoney, we also have a cost of living hub with lots of tips and resources on saving on various household bills, including energy bills. It’s worth taking a look at if you’re struggling.