Ofgem explores raising energy bills as debts reach £2.6bn

It comes after figures obtained by the regulator revealed that energy debt reached a record high of £2.6bn this summer, driven by a combination of the rise in wholesale energy prices, as well as wider cost-of-living pressures.  

And with bad debt levels expected to continue increasing, Ofgem is considering whether or not to add a one-off adjustment to the price cap to reduce the risk of energy firms going bust or leaving the market due to unrecoverable debt.   

Its analysis suggests this could result in a rise in consumer bills of up to £17 a year.  

For this consultation, Ofgem will engage with industry, consumer groups and the public to consider a range of options – including how to spread the cost of any additional allowance between the varying payment methods.  

Ofgem’s director general for markets Tim Jarvis said: “We know that households across the country are struggling with wider cost of living challenges, including energy, so any decision to add costs to the price cap is not one we take lightly.  

“However, the scale of unrecoverable debt and the potential risk of suppliers leaving the market or going bust, which passes on even greater costs to households, means we must look at all the regulatory options available to us.  

“Ofgem cannot subsidise energy or force businesses to sell it at a loss and suppliers must be in a position to offer high quality services to customers.  

“We must consider the fairest way to maintain a stable energy market and we will do this in consultation with all our partners to ensure we are protecting the most vulnerable households.”  

The consultation was published on the same day as Energy UK published its Winter 2023 Voluntary Debt Commitment. The agreement, signed by energy suppliers, includes pledges of additional financial support and steps to provide support for customers in debt.