Energy Debt Recovery
By Staff Writer, Halal Incorp
Plans For £16 Household Fee To Support Energy Companies Recover £3bn In Debts
The energy regulator has unveiled proposals for an additional charge of £1.33 per month on energy bills from April next year to March 2025. This move is aimed at assisting suppliers in recovering nearly £3 billion in outstanding debts owed by customers facing difficulties in meeting their energy bills.
Ofgem emphasized that the temporary surcharge, totalling £16 over the specified period, is essential to safeguard the stability of the market and protect consumers, especially as energy debt has reached a record £3 billion.
The surge in bad debt can be attributed to the escalating wholesale energy prices and the broader financial challenges associated with the cost of living crisis, placing considerable strain on households.
Energy Debt Recovery
Tim Jarvis, Ofgem’s Director General for Markets, acknowledged the impact of cost-of-living pressures on individuals, stating:
“The record level of debt in the system means we must take action to make sure suppliers can recover their reasonable costs, so the market remains resilient, and suppliers are offering consumers support in managing their debts.”
Ofgem argued that this one-time charge is a more economical solution for consumers than the potential consequences of suppliers going out of business.
In 2021, approximately 30 energy companies folded due to rising wholesale energy prices, leading to an additional charge of £82 for every UK energy customer to ensure continuity of service.
Jarvis acknowledged the gravity of the proposal but stressed its necessity in addressing the issue effectively.
Energy Debt Recovery
The regulator’s consultation on the proposal will involve input from the energy industry, consumer groups, and the public.
Notably, the plan exempts customers using prepayment meters from incurring additional costs, as their system operates on a top-up basis, preventing the accumulation of debt seen with credit customers.
Ofgem pointed out that various industries already incorporate provisions for bad debt costs in their pricing structures, suggesting that the energy sector could adopt a similar approach within the existing price cap mechanism.
Energy Debt Recovery
Despite the recent decrease in the energy price cap from £2,500 to £1,928 since the beginning of the year, Jarvis emphasized the need for flexibility in the evolving energy sector, indicating potential adjustments to ensure ongoing consumer protection.
Source: Guardian
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