Insights ¦ Supporting Households in Energy Debt Detailed Report Final

Key Take Aways

1. Energy debt in Great Britain has surged by 118% since 2021, reaching £3.8 billion, significantly impacting over 3.4 million consumer accounts.

2. Vulnerable groups, including those with health conditions, single parents, older individuals, and off-grid consumers, are disproportionately affected by energy debt and barriers to accessing support.

3. Less than half (46%) of those struggling with energy bills contact their provider, primarily due to mental health barriers or poor communication channels.

4. Customers experiencing debt often face poor standards of support from energy firms, including long waits, inaccessible schemes, and inconsistent conduct.

5. Debt advisers frequently cite energy firms among the worst creditors, citing issues like rejected repayment offers and lack of engagement.

6. While some good practice exists in parts of the energy sector, overall, conduct remains inconsistent, impacting vulnerable consumers disproportionately.

7. Regulatory efforts by Ofgem, including debt standards and consumer confidence measures, exist but are deemed insufficient or inconsistently enforced.

8. Ofgem’s proposed debt reset aims to write off £0.5–1 billion of debt but is insufficient alone; holistic support and better sector collaboration are needed.

9. The current funding model for debt advice, based on a 2011 framework, is outdated, managing only around 2 million advised annually out of 8 million in need.

10. Sector contributions from energy firms to debt advice are voluntary, limited in scope, and insufficient relative to the scale of energy debt.

11. Existing schemes like the Warm Home Discount and Vulnerability Fund could be expanded but are underutilised or not targeted effectively for debt advice funding.

12. A comprehensive overhaul of the debt advice funding system is recommended, with mandatory contributions from all creditor sectors, based on transparent data and fair proportionality.

Key Statistics

• Consumer energy debt totalled £3.8 billion in September 2024, an increase of 118% since September 2021.

• Over 3.4 million accounts are in energy debt or arrears, a 15% rise over three years.

• The share of advice sought for energy debt has grown by 5.2% in number and 33% in value year-on-year (2022–23 to 2023–24).

• Approximately 8 million people need debt advice, yet only about 2 million receive it annually.

• Current energy sector funding for debt advice stands at around £7.3 million, from a total estimated energy sector support of £161 million across schemes.

• Debts advised on in 2023–24 total £5.8 billion, with energy debts representing a significant growth segment.

• The total debts presenting at advice increased from 1.66 million in 2022–23 to 2.75 million in 2023–24.

Key Discussion Points

1. The rapid escalation in energy debt underscores the need for systemic sector support improvements.

2. Vulnerable populations face multiple barriers to accessing support, including digital exclusion, language barriers, and poor housing conditions.

3. Consumers often deprioritise energy bills, reducing energy use, sometimes to life-threatening levels, due to affordability issues.

4. Poor conduct by energy firms, including long wait times and limited access to tailored schemes, exacerbates vulnerability.

5. Good practice exists but is patchy; community-based advice agencies often encounter the hardest-to-reach consumers and deal with inconsistent sector engagement.

6. The regulatory framework, led by Ofgem, requires strengthening through sector-wide reviews, enforcement, and consumer-centred pathway analysis.

7. The ‘debt reset’ proposal will address only a fraction of total energy debt; a holistic approach involving debt advice is crucial for long-term sustainability.

8. The current funding model for debt advice is outdated, primarily funded by a finance sector levy, with sector contributions voluntary and disconnected from energy debt growth.

9. There is a compelling case for a revised, mandatory funding structure across creditor sectors, based on transparent data driven by debt volume and complexity.

10. Schemes like the Warm Home Discount, Carbon Monoxide Fund, and levies on energy profits could be expanded or better targeted for debt advice funding.

11. Sector collaboration, including formal partnerships and a broader regulatory push, can deliver better outcomes but remains inconsistent.

12. Implementing a fair, proportionate, and sustainable sector contribution will enable more effective debt advice, mitigate future risks, and improve consumer trust.

Document Description

This article presents a comprehensive analysis of households in energy debt within Great Britain, focusing on the increasing scale of debt, vulnerabilities among consumers, and the sector’s support mechanisms. It explores the roles of debt advice and regulation, identifies systemic shortcomings in sector conduct and funding models, and provides strategic recommendations for developing a more equitable, efficient, and sector-wide approach to funding debt advice. The article advocates for mandatory contributions from all creditor sectors, including energy firms, to establish a resilient system capable of addressing current and future debt challenges effectively.