Great to be up in Leeds at the StepChange offices again, talking all things energy. Some new data and approaches to reflect on… a summary below

Key Take Aways

1. Energy debt is becoming structural rather than cyclical. Domestic energy debt has continued rising even as bills have fallen from crisis peaks, suggesting that accumulated arrears will not automatically unwind as prices normalise.
2. Affordability, rather than unwillingness to pay, is the central issue for debt-advice clients. Many households are attempting to fund current consumption and historic arrears simultaneously while managing higher housing, food and other essential costs.
3. Unmanaged debt represents the most significant concern. Around £3.6 billion of energy debt was described as having no repayment arrangement, leaving a substantial stock of debt without a defined route to resolution.
4. Energy debt is now a strategic and balance-sheet issue, not simply a collections problem. Rising arrears affect supplier financing, customer relationships, regulatory priorities and ultimately costs borne by other bill payers.
5. Early intervention materially expands the range of available solutions. Payment plans, benefits checks, repayment support and wider debt advice become harder to deploy once arrears have escalated.
6. Engagement remains a fundamental barrier. Customers experiencing financial difficulty may avoid letters, calls and discussions because of shame, embarrassment or a belief that realistic solutions are unavailable.
7. Debt advice should form part of the affordability journey rather than sit at its end. Earlier advice can improve engagement, trust, financial resilience and the sustainability of subsequent solutions.
8. Partnership models are moving beyond simple signposting. Dedicated referrals, warm hand-offs, digital journeys, proactive contact and closer integration between suppliers and debt advisers are being used to maintain customer engagement.
9. Outcome data can enable more targeted intervention. Sharing customer outcomes, subject to consent, allows suppliers and advisers to understand what worked and intervene before customers become disengaged again.
10. Affordability assessments need to become more dynamic. The discussion challenged static income-and-expenditure snapshots and emphasised understanding both current affordability and future financial resilience when designing sustainable repayment arrangements.
11. Energy affordability and the energy transition are increasingly interdependent. Customers already carrying unmanaged debt may struggle to absorb transition costs or access low-carbon technologies, while management attention consumed by immediate debt pressures can constrain longer-term investment and innovation.
12. The emerging response is broader than debt relief alone. The discussion pointed towards prevention, consistent debt-management practice, better data and technology, sustainable repayment plans, stronger partnerships and longer-term structural mechanisms rather than repeated one-off interventions.

Innovation

• Warm referral models: moving customers directly from suppliers into debt advice rather than relying on passive signposting.
• Channel-of-choice journeys: combining digital end-to-end advice with warm hand-offs and alternative routes for customers who cannot or do not want to use digital services.
• Embedded expertise: debt-advice resources have been placed within supplier contact operations to transfer expertise and improve frontline practice.
• Outcome-data feedback loops: consent-based sharing of advice outcomes enables suppliers to test interventions, understand payment behaviour and respond before customers disengage.
• Holistic affordability assessment: repayment solutions can take account of customers’ wider debts and circumstances rather than assessing one creditor’s arrears in isolation.
• Standardised financial assessments: faster, consistent financial statements shared between organisations could reduce repeated assessments and improve the speed of decision-making.
• Integrated support packages: combining debt advice with income maximisation, grants, education, forbearance and other supplier support rather than treating each intervention separately.
• Dynamic affordability: moving from one-time affordability assessments towards approaches that consider how changing prices, income and circumstances affect the sustainability of arrangements over time.
• Consent-based data sharing: better use of customer, vulnerability and benefits information was discussed as a mechanism for improving affordability assessments and sustainable repayment plans.
• Smart pay-as-you-go technology: smart prepayment can provide customers with greater control while giving suppliers visibility of self-disconnection and opportunities for earlier intervention.
• Outcome-based regulation: the discussion included a shift towards regulatory approaches focused on outcomes alongside more enduring debt-relief mechanisms.
• Structural rather than episodic debt relief: replacing repeated temporary interventions with permanent frameworks designed for a persistent debt problem.

Key Statistics

• Domestic energy debt had reached almost £5 billion in Q1 and had risen for 14 consecutive quarters.
• Average customer debt had risen by nearly 70% since the second half of 2023, despite bills falling below their crisis peak.
• Debt for customers with a repayment arrangement had increased from approximately £460 to £760.
• Debt for customers without an arrangement had increased from approximately £600 to more than £1,700.
• The population with debt arrangements increased from around 1.4 million to 1.6 million, while those without arrangements increased from around 1.2 million to more than 2 million.
• Industry energy debt had grown by more than 200% since Q1 2021.
• Approximately £3.6 billion, or roughly three-quarters, of the debt described had no repayment arrangement attached to it.
• The regulator described household energy debt as having more than doubled in three years, with around 2.5 million households in debt or arrears and more than half without a repayment plan.
• Debt-related recovery costs were described as adding around £60–£70 to the average energy bill.
• Debt-cost recovery was said to lag debt accumulation by approximately 12–18 months.
• Debt-cost allowances were described as approximately £160 a year for standard-credit customers, £57 for direct debit customers and £19 for prepayment customers.
• StepChange clients typically had seven unsecured debts in addition to priority commitments.
• Consumers were reported to wait at least 12 months on average before contacting StepChange or another debt-advice provider.
• StepChange reported advising on £105 million of energy arrears over the first eight months of 2026, with £172 million representing consumption and arrears combined.
• 71% of clients with arrears had reportedly been advised to increase their agreement in principle during the previous 13 months.
• More than 11,000 existing arrangements had been protected and a further 28,000 arrangements agreed.
• Analysis of the British Gas–StepChange partnership was described as showing approximately 84–85% of customers increasing their level of payment following intervention.
• The partnership discussion cited approximately £10 of social return for each £1 invested.
• StepChange’s research included data on more than 150,000 new clients, refreshed with around 120,000 clients for the current year to date, alongside a survey of more than 250 clients with utility arrears.
• Average energy arrears among StepChange clients had more than doubled since 2021.
• The Warm Home Discount began at £120 in 2011 and had increased by £30 over its lifetime at the point discussed.
• Ofgem research was described as suggesting that up to one-third of energy debt can arise around tenants moving into or out of properties.
• Smart prepayment was described as potentially saving an average household around £200 a year versus standard credit.
• Transition-related capital and operating expenditure was described as peaking at around £35 billion per year around 2029, with the pathway becoming cost-negative only in the mid-to-late 2030s.

Key Discussion Points

1. Structural debt: whether persistent increases in arrears indicate that energy debt should now be treated as a permanent market feature rather than the residual effect of the 2022 crisis.
2. Ability versus willingness to pay: the importance of distinguishing customers who cannot afford their commitments from those characterised as unwilling to pay.
3. Managed versus unmanaged debt: the rapidly increasing level of arrears without repayment arrangements and the implications for customers and supplier balance sheets.
4. Earlier intervention: how suppliers, financial services firms and advice organisations can identify financial difficulty before arrears become entrenched.
5. Customer engagement: addressing stigma, fear, embarrassment and mistrust that cause financially vulnerable customers to disengage from creditors and support.
6. Sustainable affordability: replacing rigid repayment policies with accurate, data-backed assessments that reflect both present circumstances and future resilience.
7. Partnership operating models: developing warm referrals, dedicated teams, digital journeys, proactive contact and feedback loops between creditors and independent advisers.
8. Data and consent: establishing practical mechanisms for sharing relevant financial, vulnerability and outcome information while maintaining customer consent.
9. Consistency of treatment: creating more consistent expectations around early engagement, professional debt advice and affordable repayment plans across suppliers.
10. Support design: assessing whether temporary schemes and narrowly targeted affordability measures can materially change a debt problem that has become structural.
11. Cross-sector impacts: recognising that customers frequently hold multiple debts across energy, financial services, water and other essential expenditure, making single-creditor solutions insufficient.
12. Energy transition and affordability: ensuring that debt, vulnerability and consumer participation are considered alongside investment and low-carbon transition strategies rather than managed as separate agendas.

#StepChange

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