National Energy Action (NEA) briefing on Ofgem’s Debt and Affordability Call for Input

Introduction

National Energy Action (NEA), the fuel poverty charity, campaigns so everyone can afford to live in a warm, safe and healthy home. This is something denied to millions because of poor housing, low incomes, and high bills. National Energy Action and many other organisations have been highlighting the problems of affordability and record levels of debt in the market, for a long time. Ofgem has opened a Call for Input on the subject, which will close on 13 May 2024. This briefing highlights National Energy Action’s emerging views on what Ofgem and government can do to tackle affordability and still-rising debt levels.  

Background

In April 2024, the energy price cap will fall to £1,690 for the typical dual fuel household that pays by direct debit. Ofgem recently decided to change the level of consumption that it uses to calculate what a ‘typical’ household might pay. Under the previous calculation, the price cap would be announced as £1,769. This is 56% higher than the price cap prior to the beginning of the energy crisis, which was £1,138 for the typical dual fuel household that pays by direct debit. We estimate that the new price cap level leaves about 6 million UK households in fuel poverty, based on a definition of spending 10% or more of income on energy costs.  

Alongside the price cap announcement, Ofgem confirmed that debt levels are continuing to rise and now sit at around £3.1bn. In the Call for Input document, Ofgem confirms that the average level of debt has increased by around 50% in the past 12 months. The number of households in debt has increased by around 20%. This indicates that not only are more households falling into debt, but for those already in debt the affordability pressures are much greater. Furthermore, about two-thirds of the overall debt figure consists of arrears. This is defined as debt without a repayment arrangement. The remaining third consists of debt where a repayment arrangement is in place. This further highlights the challenge of debt: that it will continue to grow.  

Click to the right to see the full briefing document.