Britain is in the midst of an unprecedented energy debt crisis, with millions of households in arrears totaling more than £4 billion, according to a new report from the Energy Security and Net Zero Select Committee.
This figure has tripled in the past five years, underscoring the impact of the ongoing energy price crisis on consumer finances. In response, the Energy Security and Net Zero Select Committee has called on Ofgem to use £4 billion in windfalls from energy network companies to fund a comprehensive energy debt relief programme, as part of a series of recommendations in the first part of in the report ‘Tackling the energy cost crisis’.
Commission chairman Bill Esterson highlighted the urgency of the situation, saying: “British energy consumers are £4 billion in debt, while network companies have made over £4 billion in excess profits. These profits have simply come from outperforming price controls, even as millions of households have to ration their energy or go without heating.”
The committee’s report contains a number of recommendations aimed at easing the burden on consumers. These include bringing the energy price cap to the same level for all payment methods at the beginning of 2026, halving the billing period for smart meter users to six months and exempting customers from fixed costs for gas if they switch to electric heating.
The report also calls on the government to provide the energy ombudsman with a legal basis to ensure compliance with its rulings and to ban debt collection practices during ongoing investigations.
Systemic problem requires systemic solutions
The commission’s findings show that the energy debt crisis is not only affecting those in arrears, but is also driving up costs for all consumers. According to Citizens Advice, the average energy customer pays around £70 a year to cover the socialized costs of unpaid debts, and this figure is expected to rise unless urgent action is taken.
The slow rollout of smart meters has further exacerbated billing problems, with many consumers unable to access accurate bills or flexible tariffs. In 2024 alone, Citizens Advice helped more than 52,000 people with energy billing problems, an increase of 83% on 2020. A quarter of these cases involved unexpected overdue bills, often issued in breach of Ofgem rules. Martin Lewis, founder of MoneySavingExpert, described this as a “systemic problem of a lack of enforcement of the back-billing rules.”
The commission’s recommendations also extend to businesses, which face the highest industrial electricity prices in Europe – four times higher than in the US and Canada, leading to the closure of key manufacturing facilities and the loss of skilled jobs. The committee has urged the government to introduce an opt-in energy bill discount scheme for businesses, ensuring stable and competitive energy prices.
The energy crisis has intensified over the past twelve months. In February this year, Ofgem’s increase in energy prices exacerbated the problemprompting the government to launch a consultation on expanding the warm house discount. In the same month, National Grid launched its Grid for Good Energy Affordability Fund to help combat fuel poverty, through donations to charities.
