The energy regulator expects to write off up to £500million of historic debt built up during the recent energy crisis
Thousands of people will have their energy bill debt written off as part of a new relief scheme announced by Ofgem.
The energy regulator expects to write off up to £500million of historic debt built up during the recent energy crisis, in a move which it says will help around 195,000 people.
Under the current price cap, around £52 is added to annual household energy bills to cover energy debts that are never paid. The scheme could launch early next year, and will focus on people in receipt of means-tested benefits with more than £100 of energy debt.
Households will be expected to be contributing toward their debts and energy use, or work with debt advice charities if they cannot make payments.
The final consultation on the first phase of the new debt relief scheme will be published shortly. The average debt for people who do not have a repayment plan with their provider currently stands at about £1,716 per household.
Figures published by Ofgem last month showed that the money owed to suppliers by households in England, Scotland and Wales surged to a new record high of £4.4 billion by the end of June.
Other proposals by Ofgem include plans to trial changes to the process households must follow when they move into a new property.
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.
“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.”
It comes after energy bills went up again, with the Ofgem price cap rising to £1,755 for a typical dual fuel household paying by direct debit. But there isn’t actually a total cap on what you can pay for energy.
Your bill is still charged based on how much gas and electricity you use. The Ofgem price cap limits what you can be charged for units of gas and electricity, as well as standing charges.
The Ofgem price cap limits what you can be charged for units of gas and electricity, as well as standing charges, which are fixed daily amounts you pay to be connected to the energy network.
The price cap figure illustrates what someone with typical energy consumption can expect to pay each year. Ofgem assumes the average household consumes 2,700 kwh of electricity and 11,500 kWh of gas over 12 months.
