UK energy regulator Ofgem said today that it will launch a consultation on ways to protect the energy market from “spiralling debt”.
Debt on household energy bills reached £2.6 billion this summer, a record high, due to increases in wholesale energy prices and the cost of living.
Bad debt is expected to continue to increase, Ofgem said, adding that it is planning emergency measures to lift the cap on energy prices that could involve a £17 increase in annual bills to consumers.
Ofgem said it is considering whether to adjust the energy price cap in April to reduce the risk of energy companies going bankrupt.
That could mean a temporary increase in customer bills of up to £17 a year, or £1.50 a month, on average, Ofgem said.
It said this increased cost is “weighed against the risk of customers facing even higher costs and poorer standards of service if suppliers go bust”.
In the last energy crisis, consumers footed an average annual bill of about £82 on top of usual charges to cover the continuity of supply when 30 suppliers went out of business.
The regulator is launching a consultation that will last through to 2 November to engage the energy industry, consumer groups and the public to consider its options to curb energy debt.
The consultation will look at how to “spread the cost of any additional allowance between the varying payment methods”, Ofgem said.
Ofgem also said the temporary Market Stabilisation Charge, designed to stabilise the market by making suppliers pay for unused energy if customers switch, will expire on 31 March 2024.
It is meanwhile seeking views on approaches to benchmarking energy supplier costs and reviewing how to “set a single allowance in the energy price cap using data from different suppliers”.
It published a price cap call for operating cost allowances in May, looking at how to benchmark supply chain costs, which will run until 8 November.