Domestic energy suppliers faced a £1.1bn cash coverage deficit in Q3-25

Our latest analysis of Ofgem’s credit balance data indicates that domestic energy suppliers faced a £1.1bn cash coverage deficit at the end of Q3-25.

This marks the seventh consecutive quarter in which suppliers have had to finance a shortfall in net balances, indicating the ongoing challenges in maintaining capital adequacy.

Key points:

• The gross customer credit balance across domestic energy suppliers reached ~£4.6bn at the end of Q3-25
• During this same period, market debt rose to a record high of £4.48bn
• We estimate this position required suppliers to make up a £1.1bn deficit to reach the required 20% credit balance cash reserve in Q3-25

This Q3 represents a significant shift from previous years. Historically, suppliers maintained a positive net cash position in Q3, when credit balances were at their seasonal peak. Including our estimate of debit balances, Q3-25 is the first Q3 in which suppliers were in a net negative cash position, extending the cash deficit to seven consecutive quarters.

While this does not suggest that suppliers are falling short of their cash coverage requirements, it clearly demonstrates the persistent and growing challenge energy retailers face in ensuring capital adequacy amid rising debt and stubbornly high household bills.

Record energy debt of £4.48bn reinforces need for deeper, coordinated action

Domestic energy debt has reached a new record high of £4.48bn in Q3 2025, rising by ~£55m in the past quarter.

While this increase is modest compared with the sharper rises seen in recent quarters, and the number of households in debt has dipped slightly, these improvements are marginal. They’re also likely influenced by unusually low summer consumption rather than any genuine shift in affordability.

Total debt still sits £660m higher than at the same point last year, and has now grown for 12 consecutive quarters at an average rate of ~£210m per quarter.

Despite recent steps from government and the regulator, the need for stronger, coordinated action remains urgent.

Key insights from Ofgem’s latest data:

• 76% of all domestic energy debt now has no repayment arrangement in place, representing £3.4bn of total debt, which is the highest level recorded
• Average debt balances have climbed again to £1,243, a new high. Where no arrangement exists this rises to £1,634, and even customers with a repayment plan now owe an average of £725, reflecting growing strain across all groups
• Prepayment meters now account for just 39% of all repayment arrangements, the lowest proportion since 2022, indicating a continuing shift away from PPMs as a route for debt management

Read our full analysis.

Join senior leaders at our upcoming debt webinar

To continue the conversation, we’re bringing together senior industry leaders for a webinar exploring why energy debt keeps rising, and who’s responsible for reducing it. The session will unpack the realities behind today’s debt landscape and what it’ll take to improve outcomes for both customers and suppliers.

Date: Thursday 22 January, 11:00-12:00

Speakers: Rachel Littlewood (BFY Group), Stefan Guy (E.ON Next), Rob Harris (Utility Warehouse), Rich Hughes (EDF).

Our panel will discuss:

• The root causes of the industry’s current debt position, from policy decisions to shifting customer behaviours
• What suppliers can realistically influence versus what requires regulatory or government intervention
• How protection frameworks and incentives shape repayment, engagement and prevention
• The practical actions the sector can take collectively to drive meaningful progress

To secure your place, click here.

For more on the implications of rising debt, or opportunities to strengthen customer support, contact Rachel Littlewood.