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Cost of living correspondent Kevin Peachey reports that nearly 200,000 individuals receiving benefits may have their outstanding debts to energy suppliers erased if they demonstrate an attempt to settle their dues. The accumulation of unpaid bills and charges has surged in recent times due to the high costs of energy, culminating in a staggering £4.4 billion owed to suppliers. Regulatory body Ofgem aims to implement plans early next year that could potentially reduce the total by up to £500 million. However, this initiative would necessitate an additional £5 fee on everyone’s gas and electricity bill to cover the costs, with households bound by a price cap tariff already paying an average of £52 each year towards handling existing debt as part of their £1,755 annual bill.
Under the proposed plans by Ofgem, recipients of means-tested benefits who amass energy debts exceeding £100 between April 2022 and March 2024 may qualify for assistance in eliminating their arrears. These customers would be identified by their respective suppliers and would be expected to make a partial contribution towards settling their debts or offsetting ongoing energy usage expenses. In situations where payment is unfeasible, individuals would be required to accept support from a debt charity to effectively manage their finances.
According to the latest data from Ofgem, energy debt and arrears in England, Wales, and Scotland climbed by £750 million within a year, resulting in a total debt of £4.4 billion. Over one million households currently lack an arrangement to repay their debts, prompting the regulatory body to embark on various initiatives intended to address this escalating issue beginning next year following consultation. Despite the potential recovery or write-off of up to £500 million, the initial phase of these efforts may merely curb the continual rise in customer debt rather than reverse the trend.
Additionally, the Energy Security and Net Zero (ESNZ) Committee, comprised of Members of Parliament, has emphasized the necessity to eradicate these debts using profits deemed excessive from energy network companies. While acknowledging that such profits were partly a consequence of elevated inflation, Ofgem has cautioned that revising price controls could result in supplementary costs for consumers outweighing the benefits. Charlotte Friel from Ofgem expressed concerns over the substantial challenge posed by mounting energy debt for indebted individuals and households facing escalating bills to compensate for unrecoverable debt, consequently impeding industry investment due to financial obligations
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