Thousands could have energy debt written off but bills would go up for others

Nearly 200,000 people on benefits could have their debts to their energy supplier cancelled, if they make some effort to pay what is owed.

Unpaid bills and fees have soared in recent years with energy prices so high, leaving a record £4.4bn owed to suppliers.

Up to £500m could be knocked off the total under plans that regulator Ofgem wants to take effect early next year.

But that will also require the cost to be covered through an extra £5 added to everyone's gas and electricity bill. Households on a price cap tariff already typically pay £52 a year to deal with historic debt as part of the £1,755 annual bill.

Under the plans:

Energy debt and arrears in England, Wales and Scotland rose by £750m in a year to £4.4bn, the latest Ofgem data shows.

The figures, which cover the period from April to June, show that a record high of more than one million households have no arrangement to repay their debt.

The regulator has been working on various projects to bring down the debt, starting early next year following consultation.

However, by recovering or cancelling up to £500m, the first phase may only reduce the rate of increase in customer debt, rather than reverse it.

Among the other schemes to tackle debt being considered by Ofgem is a requirement on new tenants and homeowners to ensure they are paying for their gas and electricity supply.

It said that when someone moves into a new home, energy accounts were switched to the "occupier". Bills built up under these anonymous accounts until the individual contacted a supplier to register.

Suppliers estimate this accounted for £1.1bn to £1.7bn of the historic debt in the system, which was in danger of never being paid.

Ofgem wants a system similar to that used in other countries, where customers must sign up.

In practical terms, to avoid customers being cut off entirely, smart meters in these properties would be switched to prepayment mode and have some available credit. This would leave residents eventually having to top-up or sign up to the supplier.

The regulator's plans would only cover properties where a smart meter had been fitted.

Ofgem said such schemes could eventually help bring down debt, protect vulnerable people and ease the cost burden on other billpayers.

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