Would you be eligible to have 195,000 households' energy debt forgiven by Ofgem for a total of £500 million?

The average billpayer on the Ofgem price cap pays £52 a year for energy debt

Ofgem's new Debt Relief Scheme could soon allow up to 500 million in energy debt to be written off as the regulator works to reduce the energy system's debt to £4 billion.

According to Ofgem, if the plan is put into place, it could assist about 195,000 consumers in paying off debt that was accrued during and after the 2022 energy crisis.

In the upcoming weeks, a final consultation on the debt relief program's first phasewhich is anticipated to begin in 2026will be published.

Those who have accrued more than 100 energy debts between April 2022 and March 2024 and are receiving means-tested benefits will be the main focus of this phase.

Although the program is intended to reduce energy debt for the most vulnerable households, it will also benefit households nationwide.

Since the cost of recovering debt or writing it off is added to the price cap, everyone in the UK is impacted by the 4 trillion pounds in energy debt that was primarily accumulated during the energy crisis. This includes those who have never fallen behind on their payments.

The amount of energy debt in the UK is currently making the average household on a standard variable tariff, paying by direct debit, 52 years worse off, according to Ofgem.

A 2 percent increase in the energy price cap in the last quarter of 2025 makes this particularly inconvenient for households on variable tariffs.

More safeguards are included in the regulators' larger proposals for the Debt Relief Scheme to further protect vulnerable households and reduce their likelihood of accruing large amounts of energy debt in the future.

Ofgem's director for retail pricing and systems, Charlotte Friel, described the energy system's mounting debt as a "significant challenge," noting that in addition to the stress and increased energy costs it causes, it also restricts the industry's capacity for investment and innovation.

"To safeguard consumers, we must find the ideal balance between ensuring that those who can afford it are assisted and focusing assistance on those who are most in need. In addition to directly assisting households with the burden of unmanageable debt, these proposals will alter the sector's debt management practices.

"To overcome this obstacle and create a more equitable system that benefits both present and future customers, industry and government must collaborate.

An increase in energy debt caused by unidentified house movers.

When consumers move into new homes, they often fail to set up their energy accounts correctly, which contributes significantly to the UK's overall energy debt.

Nowadays, your energy account is changed to the occupier when you move. This anonymous account is then used to accumulate bills until you get in touch with a supplier to register.

Nevertheless, these anonymous accounts may occasionally go unregistered, and significant energy debt may begin to be linked to them. In the worst situation, the debt is simply written off and never recovered, and it then costs money to find the owners of these accounts and collect the money owed.

Many other European nations, on the other hand, have a different procedure, requiring customers to create energy accounts in order to access the supply.

Who might qualify for the Ofgems Debt Relief Program?

It is anticipated that the first phase of the Debt Relief Scheme will begin in early 2026 and target those receiving means-tested benefits who have more than £100 in energy debt that was accrued during the energy crisis.

Eligible households will be expected to contribute in some way to their debt or ongoing energy use, or, if they are unable to do so at this time, offer to work with a charity that offers debt advice in order to manage their debts.

Ofgem claims that qualified households will be automatically notified about the program by their energy providers.

Check out our guide to 14 ways to reduce your energy costs for more details on how to keep your energy costs down.