You could end up paying £16 more on bills to help energy firms recover ‘bad debts’

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Ofgem has proposed the energy price hike, in order to recover almost £3bn of debt.

Energy watchdog Ofgem has proposed a rise in energy bills in order to help suppliers recover from “bad debts”.

Ofgem (Office of Gas and Electricity Markets) have set out plans to help energy companies recover almost £3bn, by adding an additional £16 charge to customers' bills.

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The one-off extra charge is said to cost £1.33 a month for the customer, and will be applied to bills paid between April 2024 and March 2025. 

Ofgem have said that the plans have been made to “protect the market and consumers”, following a reveal of £3bn energy debt.

The debt refers to the amount of money owed by customers who have struggled to pay their bills, and is unlikely to be repaid. The debt has increased substantially, due to the cost of living crisis which has included price rises in wholesale energy prices - and has led to financial strain on households. 

Tim Jarvis, the director general for markets at Ofgem said:  “We know that cost of living pressure is hitting people hard and this is evident in the increase in energy debt reaching record levels.

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“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 have stated that the one-off move would be less costly to customers that if suppliers were forced out of business.

Ofgem has proposed an energy price hike to recover 'bad debt'.Ofgem has proposed an energy price hike to recover 'bad debt'.
Ofgem has proposed an energy price hike to recover 'bad debt'. | lovelyday12 -

In 2021, following the increase of energy prices, 30 energy suppliers went out of business - leading to customers an extra £82. 

Jarvis added: “The proposals set out today are not something we take lightly.

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“However, we feel that they are necessary to address this issue. This approach will ensure the costs are recovered fairly, without penalising a particular group of customers.”

The plan will not affect customers who use pre-payment meters (PPM), as they operate on a top-up system.

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