Hi everyone!
So Ofgem have just issued a working paper outlining their plans for a debt relief scheme in the UK Energy market. Effectively, if you have accrued energy debt with your supplier between 1 April 2022 and 31 March 2024, and you’re on low income then Ofgem are going to force suppliers to write-off part or all of your debt (just the debt accrued up to March 2024, anything since then will still be on your account). Note: this won’t actually come out of supplier profits, it will be paid for by increasing energy bills for everyone else to cover the cost of these write-offs.
There are a lot of nuances in this plan so far, and the working paper is open for discussion, they won’t make any official decisions until later this year, but here is a decent overview taken from the working paper to give you an indication of who might be eligible and how it will all work:
| Scheme Objectives | Reduce domestic energy debt, improve engagement and debt culture, support work on the Debt Strategy |
| Phased Implementation | Phase 1 – Q1 2026: Customers in receipt of Means-Tested Benefits (MTBs). Phase 2 – Summer 2026: All other eligible customers. |
| Customer Eligibility Criteria | 1. Domestic Customers/households with £100 or more of debt, 2. Debt accumulated between 1 April 2022 – 31 March 2024 3. Make some payment towards current usage in the most recent billing period. 4. In receipt of means-tested-benefits |
| Engagement Conditions | Customers on MTB who are already engaged – such as those on a repayment plan or paying towards ongoing usage – will automatically qualify for debt write-off on eligible balances. MTB customers who are currently disengaged must respond to supplier contact, provide basic information and engage with at least one additional support option – such as agreeing to a repayment plan, agreeing to a smart meter install, enrolling in the Fuel Direct Scheme or accepting a signpost to a debt advice service. |
| Level of Debt Support | Capped at total outstanding eligible debt at the point of statutory consultation publication |
| Scheme Delivery and Supplier Oversight | The pre-scheme supplier readiness process and the reporting, assurance, and compliance obligations on suppliers throughout the life of the scheme. |
| Supplier Reimbursement Methodology | Presents 3 options for how we calculate the value which suppliers need to be reimbursed for- a Notional Company Model, a Supplier-by-Supplier Model and a Hybrid Model. It also discusses how customer contributions should be modelled for the scheme |
| Funding and Supplier Cost Recovery Process | Sets out that the funds for this scheme should be collected via network charges, distributed on a Pay When Paid basis with the option of 3rd Party Assignment |
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What Happens Next?
Okay, so this is a “working paper” – meaning Ofgem are looking for ideas and inputs. It’s got a really timeframe for responses, a little over three weeks, so by the end of the month Ofgem will have received all the responses they are going to consider.
After this they will open a “statutory consultation” – this effectively outlines exactly what they are going to do, but technically everything is still open for conversation or change since a “statutory consultation” is not a “decision”. For all intents-and-purposes, the statutory consultation is the decision, they have to receive some real drastic evidence in order to change their minds after issuing the statutory consultation.
My personal next steps are to read the 30 page document (you can find it here and in the link at the top of the article) and to provide a response to Ofgem before the deadline. At some point this week, I plan to do a video giving a fuller explanation of the working paper and the ideas that Ofgem are discussing for the debt relief scheme. At this point I will also ask most of you for your input on how you think the debt relief scheme should be operated.
If you end up reading it in your own time and want to share your thoughts, please email me at Richard@TheRegulatorGuy.co.uk.
Thanks everyone,
Richard Winstone
The Regulator Guy.
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