Energy bills could rise by £16 to cover customers' debts

Households face paying extra on energy bills to cover customers' bad debts under plans by the industry regulator.

Ofgem is proposing lifting the energy price cap by £16 between April next year and March 2025.

It estimates that debt levels for energy customers has risen to £2.9bn.

Last month, Ofgem announced it would raise the energy price cap, which limits the amount that companies can charge per unit of gas and electricity, from January.

It means the typical household will pay £1,928 a year for gas and electricity, up from the current £1,834 for a dual-fuel home.

On Friday, Ofgem said: "We understand the distress that rising debt in energy has on people."

But it added: "Rising debt levels create costs for suppliers."

Citizens Advice said it was seeing more people falling behind on energy bills as winter began.

But Ofgem has said in the past that if it did not implement an increase to cover bad debts, customers could end up paying more in the long run.

In 2021, wholesale energy prices soared resulting in around 30 companies going out of business.

This led to every energy customer being charged an extra £82 to cover the costs of making sure that households were not cut off.

Ofgem has opened a consultation on its proposal to increase bills by £16 a year with a deadline of 17 January for suppliers and consumers to submit responses.