Consumer Scotland publishes response to Ofgem energy debt relief consultation

Consumer Scotland, the statutory body for consumers in Scotland, published its response to Ofgem's consultation on Resetting the Energy Debt Landscape: The Case for a Debt Relief Scheme on 6 February 2025¹. The consultation concerns proposals for a Debt Relief Scheme (DRS) to tackle energy debt².

The response cites Consumer Scotland's Energy Affordability Tracker fieldwork from winter 2023/24, which found that more than one in twelve (9%) households in Scotland were in energy debt². Nearly half (48%) of respondents in energy debt were not confident that they would be able to clear their debt or arrears². The same tracker found the perceived affordability impact of energy bills on household budgets was easing, down from 35% in winter 2022/23 to 26% of households in early 2024².

On the scale of the problem, the response states that Ofgem has estimated the level of potential debt already subject to price cap debt allowances, described by Ofgem as a low estimate, to be around £400 million, which is just under a third of the £1.29bn that Ofgem estimates as the total bad debt in the market². It also cites the Financial Conduct Authority finding that 14% of all UK adults in financial difficulty felt heavily burdened by their domestic bills and credit commitments, and 28% were not coping financially or finding it difficult to cope².

Consumer Scotland sets out several positions on scheme design. It says any DRS should recover costs over a period of at least three to five years, that it would welcome a scheme matching delivery option 1 with supplier delivery and Ofgem oversight, and that funding through network costs would likely be the fairest option for consumers². It also says it would welcome a broad DRS providing for both debt write off and voluntary debt payment matching².

The response identifies the groups with the highest rates of energy indebtedness in Scotland as households with a disability that limits them a lot, households with incomes below £20,000, and those with a child under the age of 5². It notes that working-age households must apply to claim the Warm Home Discount in Scotland, as opposed to consumers in England and Wales who automatically receive it². It also notes that median gas consumption for dwellings in Scotland has been consistently higher than in England and Wales over the last decade, and 7.8% higher in 2021².

Why it matters for households

Energy debt is recovered through bills, so the design of any scheme affects all households, not only those in arrears. Consumer Scotland states that the cost of bad debt is ultimately borne by all consumers through socialised costs, such as the temporary debt allowance levy or through price cap allowances². Its call for cost-neutral delivery and progressive funding is aimed at how those costs are shared².

The response says a successful DRS will need to recognise the groups more likely to be in debt and reach them, and that it should improve consumer understanding of their options through a fair and standardised scheme². It also warns that without parallel affordability support, debt could accrue again and a scheme might reduce energy debt only for a short period².

What happens next

Consumer Scotland says it is conducting an update to its Energy Affordability tracker, with fieldwork and analysis likely to be completed in Spring 2025, and that it would welcome the opportunity to share a supplemental submission with updated insights and data². No decision date from Ofgem on the scheme is given in the response.