Energy regulator Ofgem has unveiled a debt relief plan that could write off up to £500 million (€580.0 million) of historic household energy debt. It aims to reset and reform the growing burden on bills. At present, the price cap adds a debt allowance of £52 (€60.3) to annual bills to cover debts that go unpaid and are written off.

Ofgem said the scheme could see as much as £1.1 billion to £1.7 billion of historic debt written off, depending on supplier estimates, potentially helping around 195,000 households. The total money owed to suppliers in England, Scotland and Wales rose to £4.4 billion (€5.1 billion) by the end of June. The average debt for households without a repayment plan stands at about £1,716 (€1,991). In a worst-case scenario, the figure written off could be between £1.1 billion and £1.7 billion (€1.3–€2.0 billion). The regulator added that a final consultation on the first phase will be published shortly.

Launch of the first phase is planned for early next year and will focus on means-tested benefit recipients with more than £100 of debt built up during the energy crisis. Eligible households may be asked to contribute towards debts and current energy use, or to seek debt advice if they cannot pay. The regulator also plans changes to how debts are managed and to the process households follow when moving into a new property. Charlotte Friel, Ofgem’s director for retail pricing and systems, said the rising level of energy debt presents a challenge and that the proposals aim to protect consumers while targeting support to those most in need. The first phase will be progressed with a final consultation.