Ofgem announced on 30 October that it will write off up to £500 million of energy debt, helping around 195,000 people. The Debt Relief Scheme, for which the final consultation will be published soon, aims to bring down a total of £4.4 billion of energy debt. The scheme aims to help those who are most vulnerable, and prevent the further accumulation of debt.
In the first phase of the scheme, people in receipt of means-tested benefits who have more than £100 of energy debt built during April 2022 to March 2024 (e.g. the worst time of the energy crisis), will be helped first. There are some stipulations, with Ofgem saying that people will be expected to make some contributions to their debt, or ongoing energy use, or seek help from a debt advice charity.
Overall, this intervention follows Energy Demand Research Centre (EDRC)’s research aims in energy equity, by creating more targeted support for those who are underserved by the energy system. This news will help people who no doubt have had major worries about energy debt for quite some time. However, it does also raise questions on how energy systems can be best designed in a fair and equitable way, that protect and future proof people from potential future energy price shocks.
It is important to ask who will ultimately pay for the ‘reset and reform’ of energy debt. At present, energy debt payments are spread across bills. According to Ofgem, the current debt allowance adds £52 to an average bill under the current price cap. Over the last few years, we have heard stories from several research participants of the hardship that high energy bills cause, while many companies in the wider energy sector have turned a large profit. For example, the End Fuel Poverty Coalition has reported that just 20 companies made £483 billion in profits since the energy crisis started – and even though many of those profits were made in the international oil and gas markets, such news can erode consumer trust also in domestic markets. This matters as consumer trust is key in the successful delivery of government energy efficiency programmes, such as ECO, for example.
Energy efficiency measures, such as insulation, can reduce energy demand and make homes more energy efficient, reducing bills and increasing living comfort. However, it is vital that these measures are installed properly by skilled workers. There have been recent news and damning reports on the delivery of ECO, particularly relating to problems caused by poor installations. A recent National Audit Office report found that 98% of homes who had external wall insulation installed under ECO, for example, require major repair works due to poor installations leading to problems of damp and mould. In some cases, people, who thought that they were doing the right thing, have had to endure indecent living conditions for several years, affecting their health and wellbeing.
As for asking people in energy debt to get help via advisors, this requires a very tailored approach to ensure that those who need help get the right advice at the right time. Recent research from EDRC on energy advice shows that the current energy advice provision in England, for example, is partly worsening, rather than alleviating, existing social inequalities. The research found that most of the energy advice is provided by non-governmental organisations, with advice often given in conventional forms with limited input and engagement from citizens on its design. Advice also tends to focus on energy saving tips, often ignoring the socially challenging circumstances that can cause issues with energy bills or poor housing conditions. Advice is also not always targeted for those who are from disadvantaged places and/or groups.
The National Energy Action estimated that there are over 6 million people in the UK in fuel poverty, facing high levels of home energy injustices. It is welcome that Ofgem is addressing energy bill debt, but there are also more fundamental questions that need addressing to improve energy equity across society. While carefully targeted and tailored energy advice can help, only by ensuring that the energy system has equity at its heart, can we start to design and deliver better energy demand action – such as energy efficiency programmes – without the risk of needing remedial works or accumulating debt years down the line. For this we need to involve people and their lived experience, as well as question profit-driven global incumbents. EDRC is continuing these discussions, by for example in meetings with Members of Parliament in the coming weeks.
