Government ministers are considering a plan to add a surcharge of up to £45 to household energy bills to address a growing £1.29 billion debt owed by customers, fueled by the cost-of-living crisis.
Government ministers are deliberating on a scheme that could impose an additional charge of up to £45 on household energy bills, aiming to tackle a whopping £1.29 billion in customer debts exacerbated by the cost-of-living crunch. Ofgem has orchestrated this strategy following a significant escalation in debt during tough economic times, prompting urgent discussions with the Department of Energy Security and Net Zero under Energy Secretary Ed Miliband.
According to the regulator, while the move could stabilize finances in the long run, it does raise concerns over 'perverse incentives' as it 'may suggest to consumers that energy bills do not need to be paid'. Strikingly, nearly three million households are currently in arrears with their energy provider, contributing to a total debt sum of £3.82 billion - a figure that surged by £1.29 billion in the wake of the pandemic's effect on energy prices. Ofgem is insisting on drastic steps to reverse the trend, reports The Express. Options tabled by Ofgem include tacking on £9 annually to average energy bills over five years to amass £1 billion or amassing half that amount by adding £7 to bills across three years. The consensus is that such expenses should be collectively borne, given the bleak outlook on recovery from debtors, particularly as Ofgem's findings reveal that a third of indebted customers or those in arrears earn less than £16,000 yearly, contrasting with around 16% of those who are debt-free. 'This indicates that much of this debt is unlikely to be repaid and putting more stress on these individuals through debt chasing will likely only have negative consequences', the regulator says. Options include suggesting to affected households that £1 of their debt will be written off for every £1 they repay themselve
ENERGY DEBT HOUSEHOLD BILLS COST OF LIVING OFGEM GOVERNMENT POLICY
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