Response to Ofgem’s consultation on improving debt standards in the domestic retail market
Response to Ofgem’s consultation on improving debt standards in the domestic retail market 338 KB
Citizens Advice welcomes Ofgem’s decision to address the issue of debt standards in the retail market. The issue of debt in the domestic retail market is urgent, and will continue to grow unless energy affordability is addressed in a sustainable way. Last year we highlighted some of the risks and poor service that some consumers currently face in our report, The Debt Protection Gap.
The evidence from our service shows that the energy affordability crisis is far from over. We helped over 92,000 people with energy debts in 2024, higher than in any other year on record. The amount of debt our clients owe to their energy supplier also continues to increase year on year, with an average of £1,400 in December 2024 compared to an average of £1,250 in December 2023.
The impact of debt on consumers is significant. Falling into debt is a stressful process for consumers which can impact their mental health, and can lead to consumers engaging in energy-rationing or cutting back on other essential costs such as food in order to manage the cost of energy. Consumers in debt are also unable to effectively engage with the market. The restrictions on customers in debt switching mean that consumers may remain on unsuitable, and often unaffordable tariffs, and are unlikely to be able to engage with low carbon products and services in future.
The proposals on the debt support element of the debt pathway are a positive focus for Ofgem. When consumers fall into debt, ensuring that they remain on the debt pathway for as short a time as possible can prevent consumers becoming trapped in a cycle of debt and unaffordability. Giving consumers access to adequate information and support, appropriate to their situation, will also enable better outcomes for consumers. In particular, we are supportive of prioritising the following options:
Standardisation of ability to pay assessments;
Third party authorisation; and
Requiring suppliers to accept offers of repayment from credible third parties.
These proposals will enable consumer groups and charities who provide specialised debt advice to support consumers in a more efficient manner. They should limit the length of time an adviser must spend attempting to agree a repayment plan on behalf of a consumer. In addition, introducing rules standardising ability to pay assessments for suppliers should mean that consumers have more success agreeing suitable and affordable repayment plans for themselves. In implementing any changes Ofgem must ensure that its changes improve consumer support, but do not lead to worse outcomes for statutory advice services which consumers - including the most vulnerable - rely on. The policy proposals are positive, but focus on the ‘debt support’ element of the debt pathway. The ‘debt prevention’ and ‘debt recovery’ elements are equally important to consider in working to eliminate the risk of debt building. We welcome the progress Ofgem have made so far, but we think that Ofgem should do more to limit the risk of debt building up in the first instance, and in limiting the impact of debt recovery practices on consumers.