Consultants suggest urgent measures, such as social tariffs, to prevent further harm to both suppliers and vulnerable consumers.
In response to Ofgem’s recent announcement on the recovery of bad debt, consultancy Cornwall Insight suggests urgent measures are needed to prevent the vicious cycle of supplier failures and rising energy bills.
Dr Matthew Chadwick, Lead Research Analyst at Cornwall Insight, said: “The mounting weight of unpaid energy debts is a crushing burden for suppliers, many of whom are already operating on razor-thin margins.
“We currently have 241 fewer domestic suppliers in the market than November 2020. The costs for failed suppliers ultimately fall on the shoulders of those paying their energy bills.
“Without intervention, suppliers and consumers could be trapped in a vicious cycle of rising bills, mounting debts, supplier failures, and even higher bills.
“The question of how to recover these debts without saddling struggling consumers with even higher bills is not easy. Ofgem acknowledges that targeting only the vulnerable for debt repayment is both unfair and impractical.
“On the flip side, their blanket proposal to raise bills by £16 per year for all non-prepayment customers could be seen as placing the burden on everyone, regardless of their ability to pay.
“To safeguard suppliers from collapse without increasing fuel poverty and bad debt, urgent consideration of effective measures, such as social tariffs, to support the most vulnerable in paying their energy bills, is essential.”