Energy regulator Ofgem has proposed a new system for home movers to help tackle Britain's spiralling energy debt. Under the plans, anyone moving home will have around two weeks to register with their new supplier before their power is cut off.
This is part of a plan to reduce the almost £4.5 billion of debt owed to energy providers by consumers. A significant part of that debt is incurred by people moving to a new address and either failing to set up an energy account with the firm that powers the property or taking a long time to do so.
To recoup the cost of Britain's energy debt, around £52 is added to the average energy bill each year. Ofgem hopes the proposed system, along with other measures to tackle historic debt, will reduce costs for the average consumer.
"The growing amount of debt in the energy system is a significant challenge that affects us all,” said Charlotte Friel, a director at Ofgem. “For those living with the stress of debt, for households paying higher bills to cover historic debts, and for an industry carrying the weight of unpaid costs – the impact is huge.
"Moving home is stressful enough – add energy debt and it’s worse. That’s why our new proposals aim to stop debt in its tracks, tackling today’s problem and preventing tomorrow’s."
Why is Britain's energy debt growing?
At almost £4.5 billion, Britain's energy debt has more than doubled since the energy crisis began in 2022. Even though bills have dropped since the height of the crisis, many people still struggle to pay for their energy or repay the debt they have built up over the last few years of high prices.
Much of this debt is considered 'unrecoverable' and will not be recouped, so energy providers are instead paid a "debt allowance" that adds around £52 a year to the average bill under the Ofgem price cap. Alongside people unable to pay their bills, another major contributor to Britain's debt figure is people moving home. Home movers start building up debt from the moment they move into their new property until they set up an account with the existing provider and start paying.
Households usually take about 70 days to set up their new account with the relevant energy supplier. The delay could be due to an inability to pay, not realising how the system works, or simply not finding the time amid all the other jobs associated with moving house.
In the meantime, consumed gas and electricity is charged to an unnamed account registered to the property, with all correspondence sent by post, addressed to 'The Occupier'. The new residents need to open this post and follow the instructions to set up their account and payment method. The debt built up by movers is estimated to account for between £1.1 billion and £1.7 billion of the total amount owed, so it is understandable that Ofgem is seeking a solution.
How will the Ofgem proposals work?
The new plan will involve switching energy meters to prepayment mode remotely when someone informs their supplier they are moving out. £30 of credit will be added for the next resident, likely giving them around 14 days to set up their account before the lights go out.
While 14 days may not seem like a long time once you consider all of the other tasks associated with moving, not to mention potential post delays and administrative errors, these ideas remain a proposal and may be adapted by Ofgem moving forward. In fact, Ofgem has encouraged consumer groups, energy suppliers and charities to add their input to the proposed scheme.
Critics may point out that while the debt built up by movers is significant, so too is the amount of money owed to consumers by energy companies. Around £240m has been left in the almost two million accounts closed over the last five years, which suggests that someone building up energy debt in their new home may have left some credit behind at their old property.
What to do if you're struggling to afford your energy bills
While Britain's total energy debt is an imposing figure, there are ways to bring it down. Ofgem is planning a separate scheme to write off £500m of energy debt and individual energy suppliers are expected to help customers arrange an affordable repayment plan if the cost of energy is becoming overwhelming.
The best first step if you are struggling to pay your energy bills is to contact your provider as soon as possible. We explain all the next steps to follow in our article 'What to do if you’re struggling to pay your energy bills'.
If you are worried about your energy costs or would just like to pay a bit less, read the tips in our article 'How to save money on your energy bills'. There are also a number of grants and schemes available for those who are most vulnerable. More information and help on the cost of living can be found in our Cost of Living guide.
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