Debt Justice’s response to Ofgem’s “Update on our approach to the Debt Relief Scheme (DRS)”.
Introduction
Debt Justice is a campaigning organisation that exists to end unjust debt and its root causes. Through campaigning, community organising, research and activism, we build collective power by working with the people most affected by household debt in the UK. We’ve helped to bring about some big changes, including:
- A £500 million support fund and £65 million vulnerable renters package announced to support people with the financial impacts of the Covid19 pandemic
- An announcement by Ofgem to explore a £0.5-£1bn scheme to reduce energy debt
- Debt write-offs and financial support for members our network of campaigners who all have lived experience of overindebtedness.
- A ban on bailiff visits for households in receipt of council tax support in Manchester City
- Cancellation of school meal debt in the city of Glasgow
- A cap on the cost of credit for rent-to-own products.
In May 2025, we launched our Campaign to Ban the Bailiffs, including a new research report Ban the Bailiffs: Ending the use of bailiffs for council tax debt. Our campaign spans the UK, including supporting local campaign groups led by people with lived experience of debt in London and Greater Manchester.
Response
- Whether we should cap available DRS support as at statutory consultation date?
We do not support capping DRS support at the statutory consultation date.
The proposed cut-off of 31 March 2024 does not reflect the ongoing nature of the energy crisis. Energy bills remain significantly above pre-crisis levels1, and the number of households in fuel poverty has doubled compared to the period before the crisis.2 Moreover, energy debt continues to rise at an alarming rate, with nearly £500 million in additional debt accrued since March 2024.3
To define this date as the end of the crisis risks excluding many households still in urgent need of support, or who may have been just about making ends meet but are now struggling.
A sustainable and responsive scheme must acknowledge the continued financial pressures facing consumers and adapt accordingly. Limiting support based on this date undermines the scheme’s ability to deliver meaningful relief and risks entrenching hardship for those who fall just outside the proposed eligibility window.
- Are there any alternative engagement pathways that customers could choose to demonstrate a commitment to resolving debt sustainably?
We are concerned that the current engagement pathways proposed under the DRS are disproportionately punitive and fail to reflect the realities faced by customers in energy debt. The majority of those in debt are on low incomes and have been impacted by unprecedented increases in energy prices, circumstances entirely beyond their control. Meanwhile, private companies across the energy sector continue to make enormous profits.4
Rather than requiring engagement mechanisms that primarily serve supplier interests, the scheme should begin with unconditional debt relief for customers with over £100 of debt, followed by pathways to access support services including debt advice and income maximisation services. Alongside this, there should also be stipulations put on suppliers to move customers in debt onto more affordable tariffs or social tariffs. This would ensure the scheme alleviated hardship, without imposing further pressures on those already struggling.
If absolutely essential, the only engagement pathway required should be contact with an accredited debt advice service. The other proposed options: repayment plans, smart meter installation, and enrolment in the Fuel Direct Scheme, are all supplier-led and don’t have the mental and financial wellbeing of people in debt at their heart. These options should be removed from the engagement criteria to prevent potential misuse and ensure the scheme remains focused on supporting consumers.
- Do you agree with the conditions proposed for both engaged and currently disengaged customers, or do you believe that the threshold for accessing DRS should be lower or higher (and if so, please clarify how)?
We do not agree with the proposed conditions for accessing DRS support.
People in energy debt are overwhelmingly likely to have a low income5. Nearly half of people who seek debt advice are in a negative budget.6 A number of the engagement requirements suggested would require them to be able to make some contribution to their debt.
This completely ignores the fact that many households will not have the funds to be able to make this contribution. A household which has less than £0 left in their budget after paying essentials will not be able to engage with a smart prepayment meter, a repayment plan or enrolling in Fuel Direct. These criteria are based on an understanding of debt that is outdated and inappropriate.
Further, people in energy debt are more likely to be living with mental health problems.7 Putting engagement requirements on their ability to access relief unfairly disadvantages those who may struggle to engage.
As above, we strongly suggest that no conditions be placed on people in debt to access debt relief. At a minimum, the threshold for accessing the DRS should be much lower, either limited to engagement with some form of support (such as debt advice, income maximisation or a welfare and support team) or any form of engagement such as contacting a support team should be enough evidence of intent to engage.
- Are there any improvements that could be made to existing processes or rules to make the scheme more effective – e.g. to the Fuel Direct Scheme
No response
- Which of the three options do you prefer?
Our preference is option 3, which excludes Customer Contributions from the calculation of supplier reimbursement. This approach ensures that individuals in energy debt are not penalised or excluded from support based on their ability to contribute financially. This is particularly important given that many are on low incomes and facing severe financial hardship.
The inclusion of Customer Contributions in Options 1 and 2 means that people in debt are unfairly expected to contribute in order to access support, and risks unfairly capping support for those with the fewest resources or who are least able to pay.
Instead, we insist Ofgem require suppliers and network companies to make a contribution towards the scheme instead as a percentage of their profits. This would ensure the scheme’s delivery does not push bills ever higher for consumers, which has the potential to push even greater numbers of customers into debt.
- Do you consider that 5% is a reasonable value for Customer Contributions (including debt displacement) or do you have an alternative methodology for assessing this value?
No, as above, Customer Contributions should be 0%.
- What data does Ofgem need to help inform this decision?
It is not clear from the working paper that Ofgem has a robust understanding of who is in energy debt. Research from organisations such as the Money and Mental Health Policy Institute has found that people in energy debt are disproportionately on low incomes, have low financial resilience, and are more likely to experience mental health challenges.8 The scheme’s current design seemingly does little to take these factors into consideration,
To inform decisions around engagement, eligibility, and reimbursement, Ofgem should gather and analyse data on exactly who is behind on energy bills. This might include data on income levels, financial resilience (e.g. levels of debt to other household bills, or access to savings) and other extenuating circumstances such as vulnerabilities.
However, this should not come as a delaying factor to rolling out this support, already now nearly a year after it was announced.
- Preferred methodology for calculating reimbursement rate?
Based on the information provided in the working paper, our preferred methodology is the Notional Supplier Model.
However, while the paper outlines three options, it does not clearly explain the implications of each model on customers and people in debt, and supplier profits. Therefore our guiding principle is whichever model provides the best outcomes for people in debt, and the lowest cost for consumers.
Our understanding is that the Notional Supplier Model offers the lowest cost to billpayers, as it applies a standardised industry-wide provisioning rate. We understand this approach to be more transparent and equitable, and it avoids rewarding suppliers with more aggressive collection practices.
- Whether under a hybrid or supplier by supplier model we should set a single rate for each supplier, or a rate for each supplier by payment type
No response
- Is ‘Pay When Paid’ with Third Party Assignment Rights the appropriate methodology for reimbursing suppliers?
No response