Britain’s energy regulator has launched a consultation on a plan proposing that households pay an extra £16 on top of their energy bills to help protect suppliers from going bust due to rising bad debt.
Ofgem said that the extra charge, which would be levied at £1.33 a month on bills paid between April next year and March 2025, is to “protect the market and consumers” after figures showed energy debt has hit a record £3bn.
The level of bad debt, which refers to the amount of money owed by customers that is unlikely to realistically be repaid, has soared due to increases in wholesale energy prices and the wider cost of living crisis putting pressure on household finances.
Tim Jarvis, director general for markets at Ofgem, said:
We know that cost of living pressure is hitting people hard and this is evident in the increase in energy debt reaching record levels.
The record level of debt in the system means we must take action to make sure suppliers can recover their reasonable costs, so the market remains resilient, and suppliers are offering consumers support in managing their debts.
Ofgem said this one-off move would be less costly to consumers than if energy suppliers were forced out of business. Any extra costs would not be passed onto customers who use prepayment meters under the regulator’s proposals.
