Response to Ofgem’s consultation on resetting the energy debt landscape: the case for a debt relief scheme
Citizens Advice welcomes Ofgem’s proposals for a relief scheme to tackle energy debt caused by the energy crisis. We will work openly and constructively with Ofgem, the Government, energy suppliers, energy networks and other consumer groups to support delivery of the scheme at pace over the coming months, so that the scheme is ready to launch ahead of winter 2025/26.
While we generally support the scheme, we have some concerns about the proposed approach. We recommend that the scheme design is simplified to improve deliverability and that Ofgem focuses tightly on debt caused by the energy crisis. We disagree that consumers should pick up the full financing costs of the scheme and see a credible case for energy networks covering this with zero interest, using windfalls that have arisen from interest rates being higher than expected in recent years. We also want Ofgem to publish more evidence about the costs and benefits of the scheme.
The energy crisis is not over for millions of people. Energy prices are still both volatile and higher than before the energy crisis. Recent projections estimate that prices will rise in April, and are likely to rise further in July, and are not likely to fall substantially at any point ahead of the scheme's introduction in Autumn 2025. Energy debt remains the most common type of debt our advisers deal with - over the course of 2024 we helped more people with energy debts than any previous year. This trend continued throughout the year, with December higher than the same period in any other year.
To ensure that debt relief can be a one-off and deliver ongoing benefit, the Government also needs to tackle the problem of energy affordability going forward. In our view, this means that the debt relief scheme must be accompanied by long-term targeted support through a reformed Warm Home Discount, as well as a long term increase in debt advice capacity to support those who fall behind on their bills to access sustainable solutions.
Alongside implementing the debt relief scheme over the coming months, we will continue to work with Ofgem to improve the standard of debt management across the energy sector. We are also committed to working to expand access to debt advice, including through a proposed debt advice service, building on the consumer service helpline. This will significantly improve support for people who have fallen behind on their energy bills, and help them find sustainable solutions.