Ofgem data shows energy debt hits a record £4.4 billion as households struggle to pay

Energy debt to suppliers in the United Kingdom rose to a record £4.4 billion, according to data published by the regulator Ofgem. The figure, which covers England, Wales and Scotland for the period from April to June, marks an increase of more than £750 million from a year earlier and comes as policymakers seek ways to curb rising arrears among struggling households.

The environment of higher bills has left more than a million households without a formal repayment plan, a record share, Ofgem said. The regulator noted that average debt among households without a repayment arrangement stands at about £1,716 per household. The rise in debt mirrors a broader squeeze on consumers from elevated energy costs that have persisted even as wholesale prices have cooled from peaks reached during the worst periods of the energy crisis and the cost-of-living spike that followed the Covid-19 pandemic.

To tackle the growing debt burden, Ofgem has been considering a package of remedies that would include a Debt Relief Support Scheme. Under the proposed approach, energy suppliers could either write off debt that is deemed unlikely ever to be repaid or use a “debt matching” process that aligns future customer payments with outstanding balances to clear arrears more quickly. Any such scheme would likely be funded through electricity and gas bills shared by all customers, a point Ofgem has stressed as a potential funding mechanism while seeking to limit the risk of unsustainable debt building up in the future.

Alongside debt relief, Ofgem has emphasized the need to improve access to help from charities and debt-advisory services. The regulator said that a consistent, accessible pathway for struggling households could help prevent debt from becoming unmanageable and improve the resilience of energy suppliers to write-offs or delayed collections.

The data reflect a longer-running trend: energy prices surged in the years after the Covid outbreak, contributing to financial distress for many households. While prices have retreated from their peaks, they remain high relative to pre-crisis levels, and the cost of essentials such as energy continues to weigh on household budgets. The debt picture is evolving as households contend with both current bills and the backlog of unpaid charges from previous months and, in some cases, years.

Ofgem said it remained focused on how to structure debt coverage when the probability of repayment is low, and it indicated that the Debt Relief Support Scheme could be part of a broader reform package designed to improve affordability and ensure a stable energy market. The regulator also highlighted that the scheme would require broad support across stakeholders, including government, suppliers and consumer groups, and would need to be designed to avoid creating incentives for future arrears.

Industry observers note that the scale of debt underscores ongoing affordability concerns despite energy price declines from their all-time highs. Consumer groups have argued for stronger protections and easier access to support, while suppliers have stressed the uncertainty around collecting arrears and the potential impact of any debt-relief funding on all customers' bills. Regulators have signaled a preference for bridging immediate relief with longer-term measures that reduce the likelihood of debt accumulation in the future.

In this context, Ofgem’s review of debt-related policies comes as part of a broader assessment of how to balance consumer protection with the financial viability of energy suppliers. The regulator has indicated it will publish further details as it advances its analysis of the Debt Relief Support Scheme and other potential tools intended to curb unsustainable debt and improve repayment outcomes for households facing persistent financial hardship.