A senior energy industry official has told ITV News that its new debt plan will add £6 to a typical energy bill per year.
The Ofgem spokesperson has also confirmed that the scheme could also be doubled in size – eventually costing up to £1 billion and wiping off debts for 2.3 million customers.
The energy regulator Ofgem is planning a scheme to write-off energy debts for around 195,000 customers who build up arrears during the period when prices peaked.
The plan, due to start early next year, would be funded by customers – not by the energy industry.
Speaking to ITV News, Charlotte Friel, Director for Retail Pricing at Ofgem, confirmed that the scheme would add 50p a month to an average bill.
The energy regulator says that if nothing was done about the energy debt mountain, now standing at £4.4 billion, customers would end up paying more to deal with the arrears.
Already the cost of paying off other people’s debts adds a typical £52 a year to bills.
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The planned debt write-off scheme is only phase one of what could be a much bigger scheme – which could expand to deal with up to £1 billion in energy debt. It’s estimated that £1.9 billion in arrears built up in the so-called “energy crisis” after the invasion of Ukraine.
The proposed debt relief scheme initially aims to cut £500m from arrears, helping households who are on means tested benefits.
To be eligible, customers must have more than £100 of debt built up between April 2022 – and March 2024, when energy prices peaked.
They will be identified automatically and contacted by suppliers.
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