The call for action on consumer energy debt forms part of a series of recommendations in the first part of the Energy Security and Net Zero select committee’s report into the Cost of Energy.
In the second part of the inquiry, the committee will be looking at how costs like upgrading the grid and building new sources of energy generation are making up an increasing amount of the household bill. The Committee will be focusing on how bills might be reduced in the next phase of its Cost of Energy inquiry.
Chair comment
Committee chair, Bill Esterson said, 'British energy consumers are £4 billion in debt, while network companies have made over £4 billion in excess profits. These profits have come simply from outperforming price controls, even as millions of families ration energy or go without heat.
'We’re calling on the Government to use these windfall profits to fund a lasting energy debt relief scheme, recognising the deep and enduring impact of the energy price crisis.
'But this must only be the start. Non-commodity costs like upgrading the grid and building new sources of energy generation are making up an increasing amount of the household bill. The Committee will be focusing on how bills might be reduced in the next phase of our Cost of Energy inquiry.'
The report found that:
- Record consumer energy debt is being carried over onto all bills – including those already unable to pay
- Standing charges are a 'regressive tax on energy access'
- 'Toothless' Energy Ombudsmen should be put on a statutory footing
- Sluggish and unreliable Smart Meter rollout has led to billing issues and limits access
Millions of customers currently owe a total of more than £4bn in debt and arrears, a record figure that has more than tripled in just five years. This has a devastating impact on the wellbeing of millions, while increasing energy bills for all.
Average energy debt owed by customers without a repayment plan has doubled since 2021, reaching £1,712 at the start of this year. But while millions struggle with the profound impact of the energy price crisis on consumer finances, there is 'no shortage of money in the wider energy system'.
The Committee calls it 'completely inexcusable' that households are forced to ration energy and choose between heating and eating, while - according to Citizen’s Advice - energy networks have enjoyed windfall profits, also amounting to around £4.15bn, from outperforming network price controls.
The Committee’s recommendations include:
- Ofgem should introduce an ambitious Energy Debt Relief Scheme, consulting before spring 2026 on a scheme with lasting protection against debt and provisions for debt forgiveness.
- Government must place the Energy Ombudsman on a statutory footing, without which it remains “toothless”
- Ofgem should set the Energy Price Cap at an equal level for all customers regardless of their chosen payment method, to take effect from the first quarter 2026
- The Government must set ambitious new targets for smart meters by the end of this year, focusing on reliability of smart meters not simply installation numbers
- Standing charges are a 'regressive tax on energy access'. Customers should be exempt from gas standing charges if they convert their home to electric heating
- Standing charges should never constitute more than 50% of money put onto a pre-payment meter
- Ofgem should limit the back-billing period to six months for customers with a smart meter
- Data should be published on the compliance of each supplier with Ombudsman rulings, including whether these are delivered on time, and on the penalties it gives energy suppliers for breaching its back billing rules
- The Government must ban energy suppliers from carrying out debt collection practices while in the middle of an Energy Ombudsman investigation
- The maximum pay award that the Energy Ombudsman can grant to businesses should be increased to £50,000, to reflect the scale of billing issues that can affect them
Charities report a sharp rise in people seeking their support with energy billing issues, despite the rollout of smart meters that the Committee says has been 'sluggish, unreliable, and has failed to achieve adequate coverage across Great Britain'. The Committee says Ofgem should now halve the back billing period to six months for customers with a smart meter.
In just nine months in 2024, Citizens Advice helped more than 52,000 people with energy billing issues: an 83% increase from 2020. One quarter of these involved an unexpected back bill issued by a supplier - often in breach of Ofgem's current rules - and the average back bill increased from £1,700 in October 2021 to more than £2,500 in 2024.
This highlights a 'worrying disregard for Ofgem's rules by suppliers', with MoneySavingExpert’s Martin Lewis highlighting a 'systemic problem of a lack of enforcement of the back billing rules' in evidence to the committee
Meanwhile, the UK's industrial electricity prices are the highest in Europe and around four times higher than those in the US and Canada. This places UK businesses at a severe competitive disadvantage, forcing the closure of important production facilities and leading to the loss of high-paying, skilled jobs. The Committee is concerned that support announced in the Industrial Strategy does not go far or fast enough, and that many businesses will not survive until it is introduced in 2027.
Following recent evidence to the Committee from the CEOs of the 'Big Six' energy companies where the unregulated system of energy brokers for business customers was described as a 'wild west', Government has just announced a 'crackdown on energy brokers to stamp out exploitation' - broadly in line with concerns raised in this report. The Committee will revisit the widely reported issues around non-commodity costs on energy bills raised in that session, in the final report of this inquiry.
Further information
Source: UK Parliament
