HOUSEHOLDS will be paying energy firms a combined £1.3 billion in annual charges to help suppliers recover bad debt from April 1, a new report by anti-poverty campaign Warm This Winter has found.

The national coalition is supported by leading anti-poverty and environmental organisations; its spokeswoman Fiona Waters said yesterday that the extra costs “do nothing to reduce the debt of ordinary people but instead help energy companies pursue those who simply can’t pay.”

Energy firms were already able to charge £842 million a year on bills for bad debt allowances, but from April 1, Ofgem has ruled that an extra £735m can be charged, equivalent to £28 per household per year.

The amounts are offset by a £275m adjustment to the bad debt charges incurred after the Covid pandemic.

The combined impact of these charges varies depending on the bill type: they range from £25.17 to £129.71 per household per year.

“It’s yet another outrageous rip-off caused by our broken energy system, where ordinary people are expected to foot the bill all the time while energy giants bank billions and their bosses live in the lap of luxury,” Ms Waters said.

“We need long-term solutions such as expanding home-grown renewable energy and a mass programme of insulation to bring down energy bills for good so UK families no longer find themselves in debt through no fault of their own and are hounded for payments.”

End Fuel Poverty Coalition co-ordinator Simon Francis said: “Rather than hit hard-pressed households with higher standing charges, we need to see a longer-term approach to solving the energy debt mountain such as an industry-wide help to repay scheme.

“If Ofgem persists in implementing this charge, the very least they can do is ensure it is used to write off debts from customer accounts and isn’t spent on hiring debt collection agencies.”

Yesterday, Ofgem announced it will consider a new “dynamic” price cap based on the time of day that households use their energy. It has launched a consultation on a range of options.

Mr Simon welcomed the regulator’s reviews of the energy market but warned that lessons must be learned from the current issues with tariffs and called for those who rely on energy for medical needs to have access to good deals day and night.