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

Average debt balances reach new highs

Average balances continue to rise, with the gap between customers with and without arrangements widening further. The chart below makes clear that this isn’t a seasonal fluctuation. Debts without arrangements are rising fastest, and even managed balances are gradually increasing, signalling a structural issue that continues to deepen.

Progress in support measures is welcome, but impact remains limited

All of these insights show that industry must do more. Government and regulatory interventions are welcome, but their overall impact remains uncertain. Recent measures include:

• An expansion of the Warm Home Discount, extending help to an additional three million low-income households
• The introduction of Ofgem’s Debt Relief Scheme, which is expected to write off £300 million of customer debt
• Budget measures removing £150 from energy bills by ending the ECO scheme and shifting RO to general taxation

However, these steps only go so far. For example, the Debt Relief Scheme’s projected write-off only covers up to the last two quarterly increases, leaving a vast amount of debt unaddressed. With balances still rising, the effect of a one-off intervention is likely to be limited unless broader affordability issues are tackled.

Debt may be a wider societal challenge, but suppliers still have meaningful opportunities to strengthen collections, improve customer outcomes, and prevent the problem from escalating further.

Where suppliers should focus now 

The upcoming winter months make it even more critical for suppliers to act. Higher bills and seasonal financial strain mean many households will struggle more than before, so early intervention is key. However, it is vital that suppliers distinguish clearly between high risk vulnerability and affordability challenges. Suppliers should use data to identify affordability and step in before balances spiral, offering tailored support such as flexible repayment plans and practical energy efficiency advice.

Debt recovery will remain essential, but tone and timing matter more than ever. With holiday spending and heating costs adding pressure, suppliers should aim to strike the right balance between firmness and flexibility. Clear, empathetic communication and dynamic repayment options can help prevent disengagement and escalation.

Technology continues to play a vital role. AI and machine learning can forecast risk and guide next-best actions, enabling collections teams to focus on customers most likely to fall behind. Automation can also streamline personalised messaging and make setting up repayment plans faster and easier, helping suppliers scale their efforts without losing the human touch.

At the same time, energy debt is not an isolated issue. Collaborating with charities, local authorities, and advice agencies can provide customers with holistic support, from financial guidance to hardship funds. Winter is an ideal time for joint campaigns that raise awareness and encourage engagement, ensuring customers know where to turn for help.

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), with more to be announced.

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.