Committee publication · Special Report · 19 March 2026 · HC 1789
6th Special Report - Tackling the energy cost crisis: Ofgem Response
From: Energy Security and Net Zero Committee
Inquiry: The cost of energy
Summary
Ofgem's formal response to the Energy Security and Net Zero Committee's October 2025 report on tackling the energy cost crisis. Ofgem accepts some recommendations (energy debt relief, standing charge review, smart meter rollout) but rejects others (windfall profit funding, unified price cap across payment methods, non-domestic price caps). The regulator outlines its two-phase Debt Relief Scheme targeting £4.43bn of consumer debt, defends cost-reflective pricing, and commits to reviews of standing charges and back-billing rules by summer 2026.
Key findings
- Ofgem's Debt Relief Scheme will operate in two phases throughout 2026: Phase 1 provides debt write-offs for means-tested benefit recipients (targeting 200,000 customers, removing up to £500m debt), Phase 2 targets other customers in genuine payment difficulty via enhanced income/expenditure assessment.
- Ofgem rejects the Committee's recommendation to fund the Debt Relief Scheme through windfall profits made by energy network companies, instead proposing to recover costs from domestic customers via standing charges and volume charges.
- Ofgem maintains that setting a single Energy Price Cap across all payment methods would increase bills for the majority of vulnerable customers and distort competition; defends cost-reflective pricing where direct debit (74% of customers) costs less than standard credit (13%) or prepayment.
- The regulator will not impose a mandatory back-billing limit of six months for smart meter customers, citing only 12-month backbilling rules already in place; will instead improve supplier data recording on exemptions and provide additional guidance to suppliers on consistency.
- Ofgem rejects a price cap on non-domestic out-of-contract rates and deposits, citing risks of bespoke contract diversity and potential consumer detriment; instead commits to continued compliance enforcement and will assume regulation of energy brokers once primary legislation passes.
Tone
FactualTopics
Key actors
Bill Esterson (Chair, Energy Security and Net Zero Committee), Ofgem, Department for Energy Security and Net Zero, Energy Ombudsman, Citizens Advice, Northern Powergrid, EON Next
Notable line
“Ofgem does not expect the DRS to remain a permanent feature of the energy market.”
Key Quotes
“As Great Britain's independent energy regulator, Ofgem's objective is to protect current and future energy consumers by ensuring they are treated fairly and benefit from a cleaner, greener energy system.”
“It is completely inexcusable that while households are forced to ration energy and choose between heating and eating, energy networks have enjoyed windfall profits of around £4bn through financial outperformance of network price controls.”
“… debt—by June 2025, domestic consumer energy debt had reached £4.43 billion–an increase of 71% since 2023, with a total of 2.44 million consumers in debt.”
“We do not agree with the Committee's recommendation that windfall profits should be used to support the DRS, and have followed up separately on this issue to the Chair of the Committee in correspondence.”
“Setting a single price cap across all payment would require us to set it at a level at which suppliers could recover their efficient costs, which would mean that we would need to set it a level between the current direct debit and standard credit caps.”
“It is unjustifiable that financially vulnerable customers are expected to pay more for their energy under the Energy Price Cap because of their chosen payment method. This constitutes a poverty premium.”
“Our intention is to deliver the DRS in two phases throughout 2026, with Phase 1 seeing customers who are confirmed to be eligible for means-tested benefits receive support in the form of a write-off of historic eligible debts incurred between April 2022 and March”
“Looking forward, Ofgem have been announced as the new regulator for Energy Brokers and we are waiting for Government to introduce the primary legislation to allow us to set up and confirm formal start dates for these responsibilities.”
Source · parliament.uk record ↗