Insights ¦ Supporting Households in Energy Debt Detailed Report Final

Key Take Aways

• The rapid escalation of energy debt, with consumer debt to energy firms reaching £3.8 billion in September 2024, represents a 118% increase since September 2021, impacting over 3.4 million accounts in Great Britain.
• Certain demographic groups, including people with health conditions, single parents, older individuals, private rental tenants, and those with off-grid energy supplies, are disproportionately affected by energy debts and face multiple barriers to accessing support.
• Over half of people experiencing energy debt do not contact their provider due to mental health challenges, long call times, or fear of poor support, resulting in crisis scenarios like disconnection and deteriorating health.
• There are significant inconsistencies in energy firms’ conduct, with issues such as long waiting times, unresponsive communication, and rejection of advice-led repayment plans, which compound the debt problem.
• Debt advice agencies perceive energy firms as often the most challenging creditors, citing poor communication and inflexible procedures as primary frustrations.
• Active partnerships between some energy firms and debt advice agencies exemplify effective collaboration, leading to better customer outcomes and resource efficiencies.
• Ofgem’s regulatory measures, while positive, are viewed as insufficient in addressing the systemic issues around debtor support and conduct, necessitating further thematic reviews and regulatory enforcement.
• The increasing prevalence and value of energy debts are not currently reflected proportionately in the sector’s contribution to debt advice funding, which predominantly comes from the financial services sector.
• The current debt advice funding model, established post-2011, is outdated, relying mainly on levies from financial services and voluntary contributions from energy firms, and does not adapt adequately to shifting debt profiles.
• There is a compelling case for mandatory sector-wide levies and a nationally coordinated funding framework to ensure sustainable, fair, and resilient resources for debt advice.
• The report articulates principles for a new funding model centred on fairness, transparency, independence, sustainability, resilience, and simplicity.
• Legislative action is recommended to establish a new, proportionate funding mechanism, possibly integrating existing schemes like the Warm Home Discount, with priority given to energy sector contributions.

Key Statistics

• Consumer energy debt totalled £3.8 billion in September 2024, an increase of 118% since September 2021.
• Over 3.4 million energy accounts are in debt or arrears, accounting for a 15% rise over three years.
• 39% of the UK population either needs debt advice or is at risk of needing it soon.
• Debt advice agencies advised on around 2 million debts in 2023–24, out of an estimated 8 million people in need.
• The total value of debts presented at advice agencies was approximately £5.8 billion in 2023–24.
• The energy sector contributed around £7.3 million in debt advice funding in 2023–24, up from £2.9 million the previous year.
• The total debt advice funding from all creditor sources was approximately £161 million in 2023–24.
• Total debts advised on increased from 1.66 million in 2022–23 to 2.75 million in 2023–24.
• The average debt value across sectors ranged from £238 (BNPL) to over £2,300 (private landlords).
• The percentage change in debts seen in advice between 2022–23 and 2023–24 was 33% for total value and 5.2% for the volume of energy debts.
• The sector’s voluntary contributions to debt advice have increased since 2022, but remain insufficient relative to the scale of the debt problem.
• Estimated total energy sector funding in 2023–24 was £7.3 million, representing a notable but still limited portion of overall debt-related costs.

Key Discussion Points

• The surge in energy debt underscores a structural challenge that persists despite stabilisation efforts, necessitating tailored debt support reforms.
• Vulnerable groups, especially those with health conditions or on low income, are disproportionately impacted by rising energy costs, exacerbating health and financial inequalities.
• Access to support from energy providers remains limited due to systemic issues such as long wait times, inadequate communication, and perceived inflexibility.
• The quality and consistency of energy firms’ conduct when dealing with debtors are widely criticised, with many clients experiencing poor treatment and outcomes.
• The role of independent debt advice is critical, yet current funding mechanisms only support a minority of those in need, risking a widening support gap.
• The existing funding model is outdated, primarily funded by the financial services sector, and not aligned with the evolving landscape of household debts, especially those linked to energy.
• The report advocates for a mandatory, sector-wide levy system based on the number of debts to create a fair, predictable, and sustainable funding framework.
• Regulatory agencies like Ofgem are encouraged to conduct thematic reviews and enforce standards that protect vulnerable debtors and improve sector conduct.
• Effective collaboration and partnership models between energy firms and debt advice agencies deliver demonstrable benefits but are not yet widespread or systematic.
• The sector’s funding contributions, including voluntary schemes, should be expanded and formalised to address the escalating energy debt crisis.
• A comprehensive, legislated approach to funding, employing existing schemes like the Warm Home Discount and leveraging sector levies, is essential for resilient, long-term debt advice support.
• The report emphasizes that improved regulation, strategic funding, and sector cooperation are foundational to mitigating energy debts and supporting vulnerable consumers effectively.

Document Description

This article is an in-depth analysis of supporting households in energy debt within Great Britain, published in February 2025. It examines the rise in energy arrears, the impact on vulnerable individuals, the nature of sector conduct, and the current state of debt advice funding. The report offers concrete recommendations for strengthening support through regulatory change, improved industry cooperation, and a modernised funding framework, with a specific focus on making debt advice more accessible, fair, and sustainable. It synthesises qualitative insights and quantitative data drawn from sector stakeholders, regulators, and consumer research to inform a strategic approach aimed at reducing hardship and promoting sector-wide accountability.