Domestic energy debt reaches £4.79bn as the intervention gap widens

Domestic energy debt has risen again, reaching £4.79bn in Q1 2026.

That's another £238m added in a single quarter and marks the fourteenth consecutive quarterly increase. It’s also above the average quarterly rise of £210m seen over the past three years, with the gap between the two continuing to widen.

Around 75% of the total (£3.6bn) still has no repayment arrangement in place, while average debt balances have increased again to a record £1,329. The challenge isn't just that more customers are falling into debt, it's that those already in debt are falling further behind.

The context around these figures matters as much as the numbers themselves. This quarter, two things are true that were not true three months ago: the government-backed Energy Debt Relief Scheme (EDRS) has been paused indefinitely, and a 13% price cap increase has been confirmed for July. Ofgem’s latest debt figures predate both, meaning the next quarter is likely to be harder.

Rising debt is not only a hardship issue. An industry carrying a growing debt burden also finds it harder to earn the trust and engagement from customers, on which the energy transition depends. The two challenges are connected, and progress on one will be limited without progress on the other.

Key insights from Ofgem’s latest data

• Domestic energy debt increased by £238m during Q1 2026, taking total debt to £4.79bn
• £3.6bn (75%) of all debt has no repayment arrangement in place
• Average debt balances increased again to a record £1,329
• The industry debt book has now grown for 14 consecutive quarters
• Annual debt growth reached £624m

The pattern is not simply more households falling into debt. It’s a growing number of customers going deeper into debt within the existing population. That distinction matters for how the industry responds.

The intervention picture has changed

Ofgem's Energy Debt Relief Scheme (EDRS) was designed to write off up to £500m of historic debt in its first phase, targeting around 195,000 customers receiving means-tested benefits. A second phase, intended to extend support to vulnerable customers outside the benefits system, was never given a confirmed value, though a significant additional contribution to reducing the overall debt stock was anticipated.

The scheme has now been delayed indefinitely. Reports suggest the pause has come from the Treasury, with concerns about adding further costs to customer bills. The scheme was due to be funded through a levy of around £5 per household per year, at a time when the price cap is set to increase by 13% in July.

There is currently no confirmed timeline for when Phase 1 will proceed, and Phase 2 now appears increasingly uncertain.

There are reports of a possible government-led winter support package, with the Chancellor signalling that any support would be targeted by household income rather than distributed universally, a deliberate departure from the broader schemes used during the energy crisis. However, details remain unconfirmed, and any such scheme would need to overcome the same data challenge that has delayed the EDRS: identifying who needs support without relying solely on suppliers to administer it.

A challenge that needs a coordinated response

It would be easy to see rising debt as a failure of supplier action. It would be equally easy, and equally wrong, to see it solely as the result of government delay. The reality is that both are true.

The market itself contains features that make debt easier to accumulate in energy than in comparable sectors. This includes how customers move between properties, how standing charges continue to accrue regardless of ability to pay, how billing errors go unresolved, and how differently financial difficulty is identified and managed across suppliers.

It's also worth asking whether rising vulnerability is simply happening, or whether the system is contributing to it. Financial vulnerability is the most relevant lens when it comes to debt, and it deserves a more consistent, evidence-led definition across the industry, rather than being approached differently by each supplier.

What is consistent across suppliers, government and Ofgem is that the industry has known the direction of travel for several years. Progress hasn't been absent, but it hasn't kept pace with the scale of the challenge. The focus now is less on agreeing what needs to happen, and more on committing to deliver it at pace.

What about the debt that's already there?

Much of the public conversation focuses on preventing new debt from forming through earlier intervention, better affordability assessments and more proactive customer engagement. That work matters and should continue.

It doesn't address the £3.6bn that already exists with no repayment arrangement in place. That requires a different, and harder, question: what would it actually take to recover debt that has already accumulated, at scale, in a way that is commercially viable for suppliers and fair to customers experiencing genuine hardship?

Part of the answer lies in consistency. The variation in how suppliers approach debt today, from repayment plan design to how financial difficulty is verified, and when and how recovery action is taken, remains significant. Greater consistency across the industry, working alongside Ofgem, would reduce the extent to which a customer's outcome depends on which supplier they happen to be with.

Part of the answer lies in making better use of existing data and funding. Current sources of support remain fragmented across multiple schemes, rather than being coordinated around the households most in need. A more joined-up approach to using what is already available, rather than relying solely on new funding mechanisms, could improve outcomes without requiring new money.

Where next?

The July price cap increase has not yet fed into the debt figures published recently. The EDRS is paused with no confirmed timeline, while any winter support package remains uncertain in both scope and design.

The decisions made over the next two to three years, by suppliers, Ofgem and government together, will determine whether the industry begins reducing its debt burden or continues managing its consequences indefinitely.

While future government policy will shape the long-term direction of travel, suppliers still have meaningful opportunities to strengthen customer engagement, improve affordability assessments and intervene earlier before debt becomes unmanageable.

BFY will continue sharing our thinking on the long-term trajectory of energy debt, and what’s needed for genuine progress. In the meantime, if you'd like to discuss what this quarter's figures mean for your organisation, contact Rachel Littlewood.