Ofgem statutory consultation on Phase 1 of a Debt Relief Scheme (HTML)

Key Recommendations

• • Consumer Scotland Strongly supports Ofgem’s decision to use DWP data for Phase 1 eligibility, resolving prior structural inequities for Scottish consumers. Recommends proactive engagement with devolved institutions (e.g., Social Security Scotland) for Phase 2 to ensure equal access across Great Britain.
  • We welcome inclusion of referrals to accredited debt advice charities and recommend that supplier guidance should reference leveraging existing supplier partnerships to deliver holistic support and reduce recurring debt.
  • Consumer Scotland supports the two-phase design and goal of rapid implementation using existing infrastructure. Considerations for the capacity of the advice sector, and how the sector can be best supported to deliver the Debt Relief Scheme (DRS) should form part of the early planning for Phase 2 to ensure there is adequate support for consumers in this next phase.
  • Draft licence conditions on communicating Phase 1 to eligible non-automatic consumers should be strengthened to provide a minimum notice period before the application window closes, to ensure timely engagement and fair access for eligible consumers.
  • Ofgem should investigate the best way to track consumer outcomes in addition to compliance metrics, to assess the long-term effectiveness of the DRS and sustainability of behavioural change in line with the goals of the DRS.

Executive Summary

Consumer Scotland supports Ofgem’s proposals for the Debt Relief Scheme (DRS) as an important intervention to address rising household energy debt and improve affordability. Energy affordability and debt continue to be pressing concerns for Scottish consumers. While bills have dropped from their peak in 22/23 during the gas crisis, there are still many households that require support to meet their energy needs. Consumer Scotland’s 2025 Energy Affordability Tracker found 16% of Scottish households (equivalent to 393,000 households) currently find it difficult to keep up with their energy bills. Further, the proportion of respondents in energy debt has risen to 15% are in debt or arrears, highlighting a significant increase from 9% in 2024.

We therefore welcome Ofgem’s Debt Relief Scheme as an important scheme in helping to tackle rising consumer debt in the energy market. Consumer Scotland welcomes Ofgem’s proposals to use DWP data for data-matching to ensure equitable access for Scottish consumers, and recommend strengthening communication requirements to protect non-automatic applicants, and enhancing referral pathways to accredited advice services. We recommend Ofgem adopt early planning to support advice sector capacity for Phase 2 of the DRS and robust monitoring of consumer outcomes to ensure the scheme delivers sustainable benefits and long-term value for money.

Data Matching – Fairness for Consumers in Scotland

Ofgem proposes using DWP data sources to identify means-tested benefit recipients eligible for Phase 1. This approach depends on Digital Economy Act 2017 amendments enabling DWP-supplier data sharing. Consumer Scotland strongly welcomes the DWP data-matching approach that ensures equitable access to the DRS for consumers in Scotland.

Consumer Scotland's prior consultation responses highlighted a concern around relying on energy supplier-held Warm Home Discount (WHD) information for data-matching for the purposes of debt relief. Due to Scotland's unique WHD application process for working-age "Broader Group" recipients, there was a risk that Scottish consumers that had missed out on WHD would also lose eligibility for the DRS despite meeting underlying means-tested benefit criteria. Ofgem's revised decision to use DWP-held data avoids this structural inequality and ensures all means-tested benefit recipients are identified equally, regardless of previous WHD engagement.

Consumer Scotland recommends that, as part of Phase 2 of the DRS, Ofgem ensures the scheme is designed to operate effectively within a devolved context. This should include proactive engagement with devolved institutions, such as Social Security Scotland, to enable the use of data for future matching and validation. Doing so will help guarantee that Scottish consumers have equal access to debt relief measures, consistent with the support available to consumers across the rest of Great Britain.

Engagement Criteria – Advice Referral Pathway

Consumer Scotland welcomes Ofgem’s revised proposal to include referrals to accredited debt advice charities within the DRS engagement criteria. Consumer Scotland has previously recommended strengthening the signposting pathway by incorporating warm referrals, where appropriate, to accredited debt advice charities. This approach would enable consumers to access holistic advice covering household debts, financial support, and other measures addressing the underlying drivers of energy affordability and debt challenges. Enhancing engagement in this way will help reduce the risk of debt recurring in future. It will also support the long-term objectives and cost-effectiveness of the DRS.

Consumer Scotland recommends that Ofgem supplier guidance leverages existing partnerships and referral mechanisms during Phase 1 of the Debt Relief Scheme. Many suppliers already maintain established partnerships and referral mechanisms with organisations that provide this type of consumer support. These existing arrangements could be scaled up during Phase 1 of the Debt Relief Scheme. Leveraging these partnerships is likely to represent a cost-effective and proportionate approach of achieving the policy objectives of enhanced engagement and behavioural change.

Advice Sector Considerations for a Phased Approach

The statutory consultation proposes a two-phase approach: Phase 1 targets means-tested benefit recipients via automated DWP data matching (early 2026). Phase 2 will target non-means tested benefits consumers in genuine payment difficulty, via an enhanced income and expenditure assessment (to be developed through separate consultation, later in 2026).

Consumer Scotland supports the pragmatic design and rationale for a phased approach. We welcome the DRS reusing preexisting infrastructure where possible for rapid delivery of the scheme as household debt and arrears have continued to rise throughout 2025.

Further, our engagement with the Scottish advice sector highlighted concerns about the capacity to deliver the related support during the winter, the busiest time for energy advice. Therefore, we also welcome DRS phase 1 launch is predicted to be early 2026, with suppliers applying adjustment to eligible consumer accounts at this point. Consumer Scotland recommends similar considerations are factored into the delivery of phase 2 of the DRS. The advice sector will play an even greater role in supporting eligible consumers to access debt relief in phase 2 and will need support to increase capacity to meet this additional challenge.

Communicating Phase 1 to Consumers

Consumer Scotland recommends that the proposed licence conditions be strengthened to ensure that Phase 1 is well-communicated by suppliers, and that Phase 2 will maintain the engagement-focused culture that Phase 1 establishes, while avoiding recreating any barriers to access debt relief.

The proposed licence condition 24B.17 requires suppliers to contact eligible non-automatic consumers between the launch of Phase 1 and the end of the application window. Consumer Scotland is concerned that this obligation could be met by suppliers contacting consumers only at the end of the period, leaving consumers with no realistic opportunity to apply before the scheme closes.

While it will be in the interest of both suppliers and consumers to access Phase 1 where possible, the potential for supplier error (e.g. not processing communications until near the end of the application window) may lead to consumers missing out on this important and time-limited relief. Clear and timely communication during Phase 1 is essential to protect consumer interests and support supplier compliance. Without robust safeguards, there is a risk that consumers may miss out on the scheme or receive information too late to engage effectively. Strengthening the requirement to ensure early and proactive contact would help mitigate these risks and promote fair access to the DRS.

Consumer Scotland recommends strengthening the draft licence conditions to require suppliers to communicate with all eligible non-automatic consumers well in advance of the Phase 1 application window closing. The licence should mandate a minimum notice period, ensuring consumers have sufficient time to prepare and apply.

In other contexts, Ofgem has applied notice periods, such as 30 days or a “reasonable time” for simpler consumer decisions, including contract or price changes.  However, Ofgem has acknowledged that non-automatic consumers may be less engaged with their suppliers. For this reason, a longer notice period is essential to ensure these consumers have sufficient time to act and do not miss out on debt relief opportunities.

We therefore propose that draft licence condition 24B.17 be updated to reflect this requirement, with example wording set out below, specifying a minimum notice period of 45 to 60 days for communication with non-automatic consumers:

This revision would support the successful delivery of Phase 1 of the DRS and ensure that safeguards are in place to ensure non-automatic eligible consumers are notified of the potential for debt relief within a reasonable time frame.

Tracking Consumer Outcomes

Ofgem's implementation guidance to suppliers should emphasise that engagement pathways are complementary components of a coherent strategy for preventing repeat indebtedness and supporting long-term behavioural change, and not merely compliance checkboxes.

Consumer Scotland recommends that Ofgem's monitoring and oversight of DRS delivery include tracking customer outcomes, where possible, in addition to administrative compliance metrics (e.g. percentage of eligible customers engaged). The value-for-money of the DRS depends on consumers adapting their behaviour in the long term. It is therefore important to track whether the debt relief provided has had the desired impact in an enduring manner, and adapting consumer supports over time to enhance their effectiveness. This could be achieved through further engagement with charities and consumer groups, especially those that may be providing income and expenditure calculations or common financial statements for the purposes of Phase Two of the DRS.

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020, we are accountable to the Scottish Parliament. The Act defines consumers as individuals and small businesses that purchase, use or receive in Scotland goods or services supplied by a business, profession, not for profit enterprise, or public body.

Our purpose is to improve outcomes for current and future consumers, and our strategic objectives are:

• • to enhance understanding and awareness of consumer issues by strengthening the evidence base
  • to serve the needs and aspirations of current and future consumers by inspiring and influencing the public, private and third sectors
  • to enable the active participation of consumers in a fairer economy by improving access to information and support

Consumer Scotland uses data, research and analysis to inform our work on the key issues facing consumers in Scotland. In conjunction with that evidence base we seek a consumer perspective through the application of the consumer principles of access, choice, safety, information, fairness, representation, sustainability and redress.

The Consumer Principles are a set of principles developed by consumer organisations in the UK and overseas.

Consumer Scotland uses the Consumer Principles as a framework through which to analyse the evidence on markets and related issues from a consumer perspective.

The Consumer Principles are:

• • Access: Can people get the goods or services they need or want?
  • Choice: Is there any?
  • Safety: Are the goods or services dangerous to health or welfare?
  • Information: Is it available, accurate and useful?
  • Fairness: Are some or all consumers unfairly discriminated against?
  • Representation: Do consumers have a say in how goods or services are provided?
  • Redress: If things go wrong, is there a system for making things right?
  • Sustainability: Are consumers enabled to make sustainable choices?

Our response has been framed by our Consumer Principles. Reviewing policy against these principles enables the development of more consumer-focused policy and practice, and ultimately the delivery of better consumer outcomes.