New 'circuit breaker' strategy launched to help households get out of energy debt 

Publication type:
Press release
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Topic:
Consumer protection

Helping struggling households break the cycle of energy debt is at the heart of a new three-pronged strategy unveiled by Government and regulator Ofgem.  

Built on the three principles of Relief, Repayment and Reform, the strategy will provide a much-needed circuit breaker for customers in hardship to reset and regain control of their energy bills.  

The measures, announced as part of the Budget, will target historical debt accumulated during the energy crisis of 2022-24, support sustainable repayment and tackle some of the root causes that contribute to debt building up in the first place.  

Government analysis suggests the strategy could save a typical household around £130 over the next 10 years by avoiding the costs of debt being added to all consumers’ bills, and should prevent the accumulation of more than £5bn of new debt by 2036.   

The measures include:   

  • Launching a one-off Debt Relief Scheme to reduce debt accumulated during the energy crisis  
  • Introducing new reforms to improve the home moves process to prevent debt build-up  
  • Reviewing rules on involuntary prepayment meters to ensure they continue to protect the most vulnerable consumers while allowing suppliers to tackle rising energy debt effectively and proportionately.  
  • Modernising the ways that consumers pay for their energy, by reviewing standard credit and promoting Smart Pay As You Go, potentially saving a typical household almost around £20 a year.  

Tim Jarvis, CEO of Ofgem, said:   

“Too many households are still weighed down by debt built up during the energy crisis. Our targeted Debt Relief Scheme will help people get back on top of their finances and make a fresh start, and we welcome the Government’s support to make this happen.  

“But this is about much more than tackling historical debt. These steps balance customer rights with their responsibility to pay, empowering them to manage and keep track of their energy bills to prevent debt piling up in the first place.  

"Recognising both consumers’ rights and responsibilities, the strategy aims to set out the collective action needed to ensure that those who can repay debt do so, while providing appropriate safeguards for those facing the greatest challenges. Together, these measures will help build a fairer and more resilient energy market for all consumers."  

Energy Secretary Miatta Fahnbulleh said:  

"I know how worrying energy debt is for the thousands struggling. That affects all of us, with the costs passed onto other billpayers.   

"That’s why we’re helping vulnerable people in energy debt with targeted support and tackling debt built up in the system to help bring bills down for all.  

 “That goes alongside action we’re taking to tackle energy affordability - my number one priority.”  

Scheduled to launch in Spring 2027, the Debt Relief Scheme (DRS) will help thousands of households in genuine financial difficulty who built up debt during the 2022 to 2024 energy crisis and have little realistic prospect of paying it back.  

The scheme will support consumers in genuine financial need, with up to 2.4 million customers currently with eligible debt which could be considered for DRS support. Building on previous proposals, it will now be delivered in a single phase with support for pensioners and people on disability benefits, as well as those on means-tested benefits. Customers receiving support will be expected to engage with their supplier and take steps to help prevent debt building up again, while safeguards will remain for those who are vulnerable or facing the greatest financial hardship.  

Ofgem will consult shortly on the revised proposals, with the scheme expected to launch in the spring.  

Reforms targeted at the process people follow when they move home will also tackle one of the biggest causes of energy debt by making it easier for people to set up energy accounts when they move home, avoid unexpected bills and prevent avoidable debt from building up.    

Ofgem is also exploring whether standard credit (the most expensive method of payment) should remain the default way of paying for energy – and the regulator will work with suppliers to support the expansion of smart pay-as-you-go options, giving households more control of energy usage and costs.  

Government analysis suggests that modernising and reforming payment methods – including our standard credit work and greater use of Smart Pay As You Go – alongside the reform of the home moves process could save a typical household almost £30 by 2030, and over £10 a year in that year, rising to almost £20 a year in future years.   

A review of the rules around prepayment meters will consider the balance between maintaining appropriate protection for vulnerable consumers with customer engagement and debt management.  

Alongside this, a detailed review of the Priority Services Register (PSR) will focus on driving improvements to how suppliers identify and support consumers who may need extra support. Improving access to data and insights will also ensure that support reaches people earlier, meaning consumers spend less time repeating their story and more time getting the help they need.  

Notes to editors  

Total electricity and gas debt and arrears in Great Britain reached £5bn in Q2 2026.  

While the Debt Relief Scheme will target debt and arrears accumulated between 2022 and 2024, totalling £2.47 billion, the actual sum that is eventually written off will depend on customers engaging with the scheme, including working with suppliers and or debt advisors to agree repayment plans they can realistically afford and stick to over time.  

Ofgem’s impact assessment identified around 2.4 million customers have historical debt that may be considered for support under the Debt Relief Scheme, but not all will be eligible or receive support.  

Smart Pay As You Go (prepayment) is the cheapest payment method and is popular with many consumers who feel they have more choice and control over how they manage energy costs, keep track of spending and pay for the energy they use. Ofgem is working with suppliers to support the expansion of smart prepayment options.    

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