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Up to half a billion pounds of household energy bills loan A new relief plan is set to be written off as part of the energy regulator has announced.
ofgemThe energy watchdog is planning to “reset and reform” the UK’s rising energy debt, which is currently adding pressure to everyone. household bill,
Under the current price cap, an annual charge of £52 is levied on household energy bills as a debt allowance, which is designed to cover unpaid energy debts that are eventually written off.
The regulator is expected to write off up to £500 million of recently accumulated historical debt energy crisisThis measure is expected to benefit approximately 195,000 individuals.
The regulator confirmed that a final consultation on the first phase of its debt relief plan will be published shortly.
Data published by Ofgem last month showed that money owed to suppliers by households in England, Scotland and Wales reached a new record high of £4.4 billion by the end of June.
The average debt for people who don’t have a repayment plan with their provider is currently around £1,716 per household.
Ofgem said that in a worst-case scenario, the supplier estimated that £1.1 billion to £1.7 billion of historical debt would never be repaid and would be written off.
It comes a day after lawmakers called on the regulator to foot part of the energy debt bill through windfall profits on suppliers.
However, the cost of unpaid loans will continue to be covered by reclaiming them from the bills of all households.
Ofgem said it is moving forward on proposals to improve the way these loans are managed to reduce debt and prevent it growing to such high amounts in the future and therefore reduce the cost of living for all households.
Other proposals from Ofgem include plans to trial changes to the process that families must follow when moving into a new property.
Charlotte Friel, director of retail pricing and systems at Ofgem, said: “We know the increasing volume of debt in the energy system is a significant challenge.
“We must protect consumers by striking the right balance between ensuring that those who can pay are given the support to do so, and targeting support at those who need it most.
“These proposals will reach households directly and provide relief from unmanageable debt burdens, while also bringing about a change in the way debt is managed in the sector.”
The first phase of the scheme, which is due to launch early next year, will focus on people who are receiving means-tested benefits with loans over £100 during the energy crisis.
It says eligible households will be expected to make some contribution towards debt and current energy use or work with a debt advice charity if they are unable to make payments.