Blog: Energy debt is still rising, and so is the harm it causes

Energy debt has reached record highs and continues to grow, but the figures alone do not show the full picture. The reality is what it means for people’s daily lives and the choices they are forced to make.  

In our frontline work, we see households already living on very low incomes, often with high and unavoidable energy needs, trying to stretch what is left after rent, food and other essentials. We see parents cutting back on food, disabled people rationing warmth that they need for their health, and households living with constant stress and uncertainty about bills they cannot afford now and arrears they have no realistic prospect of clearing. 

Among National Energy Action clients in energy debt, 87.5% are on means-tested benefits, 85.4% have a health condition or disability, and 42.7% are on prepayment meters. Many are also already rationing essentials: 38.5% report being unable to heat all rooms, 30.8% are cutting back on food, and 40.7% are using blankets instead of heating. 

The lived experience of the households we support shows what those figures mean in practice. One client described a home where heating had effectively disappeared from daily life:  

‘We never had the heating on. We used hot water bottles.’ 

Another parent explained the mental strain of trying to stay on top of bills that simply could not be managed:  

‘It was making my mental health a lot worse. I was constantly worried about how we were going to do it.’  

Energy debt reflects constraint, not choices. It emerges where households with very limited incomes are exposed to energy costs that they cannot safely avoid. In those circumstances, better management alone is not enough. If the debt remains in place, so does the harm. 

That picture is consistent with wider evidence. Research by the End Fuel Poverty Coalition found that 31% of UK adults were either already in debt to their energy supplier or worried about falling behind. It also found that, among those in debt or worried about missing payments, 13% said they owed money to someone who made them feel scared. Taken together, that points clearly to inability to pay rather than unwillingness to pay. 

Against that backdrop, debt relief becomes essential. Ofgem is right to treat the growth in energy debt as a serious and persistent challenge and to pursue a wider programme of work through its debt strategy. That includes the Debt Relief Scheme, new debt standards, work on access to credit, and a broader focus on trust, engagement, and better debt outcomes for consumers. Ofgem has also made clear that part of the purpose of this work is to reduce the cost of debt on bills. Many of the measures now being discussed could improve outcomes for households at an individual level. These include stronger ability-to-pay protections, earlier intervention, better support pathways and improved use of data. But they do not, on their own, remove the burden that has already built up. That is the gap debt relief is intended to address.  

Debt also feeds directly through to bills. Ofgem’s latest figures show that, between Q4 2025 and Q1 2026, combined domestic energy debt and arrears rose by 5%, from £4.55bn to £4.79bn, and were up 15% on Q1 2025. By Q3 2025, arrears not on a repayment plan were already around three times larger than debt being repaid through formal arrangements, and that pattern has continued. Ofgem’s published allowances suggest debt-related costs are already adding around £50 to £70 per household per year to bills. Energy UK’s broader estimate puts the debt burden at around £5.5bn and warns it could reach £7bn by the end of 2026 without intervention, adding a further £10 to £15 a year to bills.  

Leaving debt in place does not preserve the status quo. It deepens hardship for households already in arrears and locks higher costs into bills for all. Debt relief is therefore not only a response to present harm. It is also a way of reducing a recurring cost embedded in the system. 

If debt continues to rise without relief at the scale required, there is a risk of renewed reliance on involuntary prepayment as a way of containing arrears. For households already on negative budgets, with no realistic capacity to absorb deductions or maintain regular top-ups, that does not resolve the issue. It restricts access to energy by turning unaffordable debt into self-disconnection, under-heating, and repeated crises. Recent Ofgem compliance work on prepayment installations is a reminder of why strong safeguards matter, and why there should be no return to involuntary prepayment as a routine response to unaffordable debt. 

That should not lead us to collapse all prepayment into the same category. Smart prepayment can deliver real benefits for low-income households when it is chosen by the customer and supported properly. National Energy Action has consistently highlighted the value of smart prepayment in ending estimated billing, giving households clearer oversight of usage and cost, and making pay-as-you-go easier to manage, including through remote top-up. It should continue to be promoted as a genuine option within a wider package of fair payment choices and consumer support. The problem is not smart prepayment itself. The problem is the use of prepayment as a coercive debt tool where households are already in crisis. 

The same point matters for the future shape of the market. The Warm Homes Plan and wider energy reforms are intended to help households benefit from cleaner technologies, smarter tariffs, greater flexibility, and lower bills over time. But households in persistent debt are often the least able to access those benefits. Debt can make switching harder, restrict access to better-value import and export tariffs, and leave households too deep in crisis to engage with home upgrades, new tariff offers, or more flexible forms of participation. Lower bills and some relief from immediate crisis are often a precondition for meaningful engagement. If the transition is to work fairly, debt relief must be understood not only as a response to present hardship, but as part of creating the conditions in which households can benefit from what comes next. 

Our new paper makes a simple argument. Government should now enable Ofgem’s Debt Relief Scheme and commit the funding needed to expand it far beyond its current scale, while continuing to work with Ofgem to strengthen the wider debt strategy measures that can improve standards, support, and outcomes over time. Without action proportionate to the size of the problem, households will remain trapped in harm and the cost of debt will continue to feed through to bills. 

Read the full paper here.