Back in August, we responded to the Policy Consultation for Ofgem’s proposed Debt Relief Scheme. Now, Ofgem have released the Statutory Consultation stage for this proposed scheme. Essentially, the Policy Consultation stage allowed us the opportunity to help shape how this scheme will be delivered, and this Statutory Consultation stage basically gives us Ofgem’s almost-final decisions on how they scheme will be delivered, so any response we give here will be almost meaningless (unless we have evidence of some huge mistake they’ve made).
Anyway, this should be welcome news to all of us, as hopefully it’ll give a huge reduction in our bills after an initial small increase.
This Debt Relief Scheme will assist people who still have debt remaining on their energy account from the crisis, specifically between April 2022 and March 2024. If you have debt on your account that was originally incurred during that period, then you may be eligible to have it completely wiped off.
Who will be eligible for the Debt Relief Scheme?
The scheme is actually being split into two phases, and this consultation focuses on explaining the eligibility and delivery of phase 1.
To be eligible for phase 1 of the Debt Relief Scheme (DRS), you need to hit all of the following criteria:
- You must be a domestic consumer (i.e. this scheme is NOT available for businesses)
- You must be in receipt of a means-tested benefit from the Department of Work and Pensions
- You must have at least £100 of debt that was accrued between April 2022 and March 2024
- You must be actively engaged with your supplier on clearing current debts
Ofgem have also given specific definitions of what constitutes active engagement with your supplier on clearing debts. You must meet one of the following criteria:
- You must have made a payment in the most recent billing period, as determined by the supplier. This includes customers on prepayment meters. Or;
- You have not made a payment in the most recent billing period, but you meet one of the following alternative engagement conditions:
- You agree to pursue a repayment plan with your supplier. In this instance, you will be eligible for support when the supplier receives the first payment on the repayment plan.
- You agree to pay your energy bills using the Fuel Direct scheme. In this instance, you will be eligible for support when the supplier receives the first payment through the scheme.
- You agree to pursue a referral to a debt advice charity. In this instance, you will be eligible for the DRS support when the referral is made.
Is there a maximum amount of debt-write off?
Yes, Ofgem are capping the amount of debt that suppliers will write off for each customer. The cap will be any remaining eligible debt (i.e. debt that was accrued between April 2022 and March 2024) that still existed on 6 November 2025. So, any debt that was incurred after 31 March 2024 won’t be eligible. That being said, I BELIEVE, if I’m reading this right, you can keep paying off debt but when it comes to wiping off they’ll credit your account with whatever amount of eligible debt you had left on account on 6 November 2025, which may help clear some of the debt that has been accrued since.
The purpose of this scheme is to help those that have been unable to get rid of this historic debt, which will actually make all of our energy bills cheaper. We all currently pay about £53 a year to help our energy suppliers manage debt, so if we reduce the debt in the market then we may be able to reduce this additional cost to suppliers.
What if I built debt during the eligible period but have since paid it off?
If you’ve since paid off the debt you incurred during the crisis, then firstly congratulations, that’s great news. But, if you’re hoping to get some of that money back then you’re out of luck. The purpose of the scheme is to help people that are continuing to struggle with debt built up during the crisis.
Who is paying for the Debt Relief Scheme?
We’re all going to pay for this scheme, it is going to increase everyone’s energy bills, specifically our standing charges.
Ofgem predicts that this scheme will cost us between £3 and £5 per household, which will be recovered over a year, so it’ll literally cost each of us pennies per month and hopefully we’ll actually be able to help people that are struggling with their debt.
I read online that Ofgem are predicting to clear around £500m of debt in the domestic energy market. Considering there is oevr £4.4bn of debt in the domestic energy market, this is barely 10% of the debt that exists. So in my opinion, this scheme doesn’t go far enough.
How do I apply for the Phase 1 Debt Relief Scheme?
The good news is that you don’t have to actually apply for this scheme. The onus is on your supplier to reach out to eligible customers and automatically apply the the relevant amount of debt relief to your account. If you’re not reaching the engagement criteria yet (as described above), then the supplier will reach out to you with communication on how you can become eligible by actively engaging in your debt.
If you think you’re eligible but don’t hear from your supplier by Q2 of 2026, then I’d recommend reaching out to them to make them aware of your eligibility.
When will the Debt Relief Scheme be paid?
There is no set date yet, but Ofgem have stated that they are setting an ambitious target of having this all implemented and paid out by the end of Q1 2026, i.e. by the end of March 2026. There is no guarantee on this yet, we’ll hear more from Ofgem in January 2026 about the expected timelines and finalised decisions.
You should also be aware that Ofgem aren’t the only ones we’re waiting on. We also need legislation to be passed in Government that allows DWP to share information with energy suppliers/network operators regarding which hosueholds are in receipt of means-tested benefits. This may cause additional delays.
Don’t worry, I’ll post and share with you all when we have a definite date for the delivery of the Debt Relief Scheme.
What are the Next Steps?
So, this consultaiton stage closes on 18 December, I will be replying to Ofgem by then and will share my reply with you all. This stage of the consultation process isn’t that important for us really, as Ofgem aren’t likely to change anything now.
After that, we wait for either another consultation stage or a final decision, it is more likely to be the latter. So basically, it is all a sit-and-wait thing now.
In the interim, you can take some control of your energy bills and switch to a cheaper tariff. If you’re in debt and can’t move to a cheaper supplier, you can still switch to a cheaper tariff with your current supplier, so make sure you’re having a look and reducing the likelihood of any debt building over the winter months.
That’s all from me, let me know if you have any questions at Richard@TheRegulatorGuy.co.uk.
Thanks all,
Richard Winstone
The Regulator Guy.
