We must, with urgency, tackle the energy debt and affordability crisis
By Emily Whitford, Senior Public Policy Advocate
This week’s announcement from Ofgem that the energy price cap is set to rise by 6% in April is troubling news, as polling from January shows energy bills were already a source anxiety for millions of households.
Coupled with the prospect of rising council tax and water bills, this development deals a further blow to households already struggling to stay afloat — or indeed already submerged in the depths of financial difficulty. So what steps are needed to address these challenges?
Energy arrears are the most common ‘priority debt’ that StepChange debt advice clients face — a trend which has persisted for several years. Not only this, but the average amount of energy arrears per client continues to deepen — having reached £2,449 in January 2025, up a concerning 20% year-on-year when compared with January 2024.
The fallout from this ongoing affordability crisis is severe. Evidence from our clients highlights some of the worrying consequences it can have — from causing or exacerbating mental health problems, through to detrimental physical health impacts due to self-rationing energy consumption.
It’s sadly no surprise then that polling commissioned by StepChange this January found that three in ten (31%) UK adults said they were worried about their ability to pay their energy bills in the first half of this year. The proportion of people saying this was a worry climbs to two in five (41%) among those who are single with children, while over half (56%) of people on Universal Credit said the same.
News that the cost of energy for a typical household on the price cap will shortly increase by more than £100 a year, or £9.25 a month, suggests these fears won’t be dissipating any time soon.
But it’s not just persistent affordability challenges which should give us all cause for concern. The latest Ofgem figures show that the total amount of consumer energy debt and arrears in the system reached a staggering £3.82 billion as of September 2024 — a 91% increase over the last two years alone.
Two things are abundantly clear: energy consumers have already experienced significant levels of payment difficulty, and this situation cannot continue. What, then, can be done to tackle these issues for good?
1. Take urgent steps to eliminate historic debt built up over the energy crisis
Alongside sector partners, StepChange has consistently been calling for a nationwide “Help to Repay” scheme designed to help tackle the record build-up of consumer energy debt in recent years — so we are really pleased to see Ofgem has listened to these calls, and is exploring concrete plans to address this challenge.
Specifically, the regulator is currently considering the introduction of a debt relief scheme with the potential to deliver up to £1 billion in write-off for eligible customers — which would come into force by the end of 2025. Feeding into Ofgem’s proposals, we emphasised how this would serve as a very positive and much needed development — and advocated for a scheme that is well-targeted and effective in alleviating some of the substantial pressures consumers with energy debt are facing.
Under current proposals, debt advice providers including StepChange will play a key role in ensuring the scheme’s success. We are working collaboratively and at pace with a wide range of stakeholders to consider service design and implementation approaches, to help inform Ofgem’s plans for the scheme. You can find our full response to the policy consultation here.
Ofgem has framed its plans for a debt relief scheme around ‘resetting the energy debt landscape’. While this intervention will certainly contribute positively to this goal, a real reset will also require efforts to drive change in supplier practice and culture around debt management.
2. Drive up standards in the energy debt pathway, ensuring consistency and compassion for those who fall behind
Our experience as a free debt advice provider shows that there is a pressing need to increase protections for, and improve the experiences of, customers struggling to keep up with energy bills and consequently interacting with the energy debt pathway.
While some suppliers are employing good practice and engaging constructively with the debt advice sector, there is still considerable progress to be made by suppliers before the industry can confidently say it has fully implemented responsible debt collection practices. We have steadily raised concerns with Ofgem around suppliers misrepresenting or inadequately explaining the service StepChange can provide, harmful billing practices, rejection of reasonable repayment offers, and the poor treatment of customers in vulnerable situations.
It is therefore encouraging to see Ofgem consulting on policy proposals to develop a consumer “debt outcome”, standardise ability to pay assessments, and improve working between suppliers and consumer groups and charities. Some suppliers have already demonstrated encouraging willingness to engage with the free debt advice sector on these issues, but we would argue a cultural shift is required to truly generate consistent, compassionate outcomes for consumers.
We therefore welcome Ofgem’s acknowledgement of its responsibility to ensure that suppliers approach debt recovery in a sustainable, empathetic way which protects consumers. Our response to the regulator’s proposals can be found in full here.
3. Bring about targeted, long-term intervention to ensure widespread energy affordability
While a debt relief scheme and improved standards for those behind on energy bills would enable some of those who are struggling to disentangle themselves from energy debt and contribute more resources towards ongoing consumption, there will be many who continue to find the weight of their energy costs a burden too heavy to carry, without targeted intervention on affordability.
In the first half of 2024, two in five (41%) of our clients responsible for paying energy bills had arrears and approaching half (47%) of this group had a negative budget — meaning after going through a full debt advice and budgeting session, their monthly income is not enough to cover their basic monthly costs.
For many of those with the lowest and most precarious incomes, fuel poverty is a daily lived experience. To put this into perspective, approaching half (46%) of StepChange clients in the first half of 2024 were spending more than 10% of their income on energy.
Acknowledging the breadth and depth of the problem is one thing. Concrete action is needed to root these experiences out for good. That’s why StepChange — as a charity on the frontline of the personal debt crisis — is calling for holistic reform designed to deliver long-term affordability to those at risk of fuel poverty, and to provide sufficient protection and ongoing assistance to those struggling with energy payments. This includes the implementation of a social tariff in the energy market.
As an initial step, it’s welcome to see the Government’s proposals to expand access to the Warm Home Discount scheme this winter. Going forwards, we want to see targeted, long-term intervention which protects consumers in vulnerable situations, including those on lowest incomes, from unaffordable energy costs once and for all.
