We warmly welcomed the opportunity to feed into this Ofgem consultation on the case for an energy debt relief scheme. Alongside sector partners, we have consistently been calling for a nationwide “Help to Repay” scheme designed to help tackle domestic energy debt/arrears, and were very pleased to see the regulator has listened to these calls and is exploring concrete plans to address this significant challenge.
Energy arrears are the most common ‘priority debt’ that StepChange debt advice clients face – a trend which has persisted for several years, with average energy debt amounts increasing over the same period. It is worth noting that:
- In the first half of 2024, two in five (41%) of our clients responsible for paying energy bills had arrears at an average of £2,260.
- 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 these reasons, we are strongly supportive of the introduction of a debt relief scheme with the potential to deliver up to £1 billion in write-off for eligible customers. 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 clearly branded, well-targeted and effective in alleviating some of the substantial pressures consumers with energy debt are facing.
Our response discusses, among other points, our views on entry routes, eligibility criteria and thresholds, as well as the anticipated impact on debt advice capacity. For example:
- We support Ofgem’s proposal for a primary, automatic eligibility route, coupled with a secondary application route for those who don’t meet automatic ‘affordability’ criteria.
- We are not in favour of a minimum eligible debt level, as even small levels of debt can be difficult for struggling households, including those with low usage or with negative budgets.
- We believe the proposed scheme delivery time period should be extended, to support debt advice sector capacity and ensure harder-to-reach eligible customers don’t lose out.
- To ensure simplicity of the scheme, we believe people who qualify automatically should receive 100% debt write-off. Payment matching could be an option for those entering the scheme via the debt advice route, alongside the option of full debt write-off.
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.
Ultimately, we strongly support the debt relief scheme and believe it must go ahead. However, our response also highlighted how this needs to be accompanied by longer-term targeted bill support to ensure people can afford to pay their ongoing bills and do not fall back into debt.