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Ofgem's January 2026 State of the Market report reveals the strangest contradiction in recent energy history — and what it means for your bills.
On 27 January 2026, Ofgem published its annual State of the Energy Market report — and it tells a story that doesn't quite add up on the surface.
Customer satisfaction has never been higher. 82% of households said they were happy with their energy supplier, an all-time record. Complaints are at their lowest since 2022. Even prepayment meter customers — historically the most poorly served group — now report the same satisfaction levels as direct debit customers for the first time.
And yet consumer debt has never been worse. The amount owed to energy suppliers by struggling households hit £4.48 billion in Q3 2025 — the twelfth consecutive quarterly record. A number that has been climbing without pause since the energy crisis began in 2021.
These two facts coexist in the same market, at the same time. Understanding why tells you a lot about where energy bills are headed — and who is being left behind.
Before the energy crisis, household energy debt in Britain sat at around £1.5 billion. Three years later it has tripled — and shows no sign of stopping.
The £4.48 billion figure represents money owed by real households who can't keep up with their bills. It doesn't include people using credit cards or loans to pay energy — just direct arrears to suppliers.
This debt costs everyone money. Ofgem estimates that uncollected debt adds around £52 per year to the average energy bill as suppliers price in the bad-debt risk. You're paying for it even if you've never missed a payment.
Who carries this debt? Predominantly households in or near fuel poverty. Around 3 million homes are thought to be in fuel poverty in Great Britain. The debt is concentrated among those who were already struggling before the crisis and could never fully recover once prices spiked in 2022.
To address it, Ofgem announced a Debt Relief Scheme targeting approximately 195,000 households who receive means-tested benefits and accumulated debt during the crisis period (April 2022 to March 2024). Phase one could write off up to £500 million of energy debt — meaningful, but a fraction of the total. The scheme was due to launch in early 2026.
One of the clearest signs that the energy market is recovering is the return of competitive fixed-rate tariffs.
By October 2025, the cheapest available fixed-term deal was around £265 below the price cap. That's roughly £22 per month you could be saving by switching away from your supplier's default variable rate.
Consumers have noticed. The proportion of households on fixed-term contracts has doubled year-on-year — roughly one-in-three are now locked into a fixed deal, approaching pre-crisis norms. The era of "there's no point switching, all tariffs are the same" is well and truly over.
What this means for you: If you're still on a standard variable tariff — the default rate — you're almost certainly overpaying. The price cap protects you from the worst, but it is not the best deal available. It's a ceiling, not a floor.
Britain's energy market has consolidated dramatically since the crisis of 2021–2022, when around 30 suppliers collapsed. Today there are 23 active domestic suppliers, down from over 70 at the market's peak.
Of those, the six largest — British Gas, EDF, E.ON, Octopus, OVO, and Scottish Power — now account for 92% of all domestic electricity and gas accounts. That figure crept up from 91% the previous quarter.
Why does this matter? Concentration isn't inherently bad — large suppliers have scale to invest and absorb shocks. But less competition means less pressure to innovate and cut prices. Switching rates remain below pre-crisis levels, which reduces that competitive pressure further.
The report confirmed that financial resilience remains an active regulatory priority. The latest casualty was Tomato Energy, which exited the domestic market after Ofgem activated the Supplier of Last Resort (SoLR) process. Tomato had previously been fined £1.5 million for failing to meet Ofgem's financial resilience requirements and had accumulated £3 million in debts before it could no longer continue trading.
Around 23,000 customers were affected. Under the SoLR process, their accounts — and any credit balances they held — were automatically transferred to a replacement supplier. No one lost money they'd paid in advance. The process worked as designed, but it's a reminder that not every supplier that enters the market will survive it.
What is the Supplier of Last Resort process? When a supplier fails, Ofgem appoints another licensed supplier to take on its customers. Credit balances are protected. Customers don't need to do anything — though they're free to switch once transferred. The cost of running the process is ultimately socialised across all energy bills.
Beyond Tomato, Ofgem confirmed it is actively monitoring the financial resilience of all remaining active suppliers. Since the 2021–2022 collapse of around 30 suppliers, the regulator has tightened the rules significantly — requiring suppliers to hold ringfenced customer credit balances and meet tougher capital adequacy tests. The current 23-supplier market is considered more stable than during the crisis, but Ofgem has made clear that further exits remain possible and the monitoring framework stays in place.
Smart meters have now been installed in 65% of homes and 61% of businesses. Of those installed, 90% are operating in "smart mode" — actually sending data back to suppliers rather than functioning as dumb meters.
That sounds good, but it means roughly 10% of installed smart meters still aren't working as intended. Ofgem moved to fix this: from February 2026, new guaranteed standards require suppliers to pay customers £40 compensation if they face unreasonable delays or failed installations. Suppliers had already replaced or fixed 900,000 faulty meters following previous regulatory action.
The push matters because smart meters are the foundation of the next big shift: flexible tariffs that charge you less for using energy at off-peak times. Smart time-of-use tariff adoption has grown by over 75% in the last year, with 835,000 customers now on such tariffs — mostly EV owners charging overnight at cheap rates.
Headline satisfaction figures are encouraging — domestic complaints at their lowest since 2022, overall satisfaction at an all-time high of 82%, customer service satisfaction at 76%. Even prepayment meter customers now report satisfaction levels matching direct debit customers for the first time. Business satisfaction is steady at 62%, though smaller businesses tend to fare worse than larger ones.
But the aggregate numbers obscure what's actually happening between suppliers. Ofgem publishes complaints data per 100 customer accounts by supplier — and the gap between the best and worst performers is enormous.
Outfox the Market sits virtually alone at the bottom with just 0.01 complaints per 100 accounts — essentially zero. Tru Energy sits at the top with 2.2, more than double the industry average of 0.9 and 220 times higher than Outfox. Among the big names: British Gas and EDF both sit at 1.2, above average; Octopus comes in at 0.6, comfortably below; OVO at 1.5 and Scottish Power at 1.4 are both notably above the industry norm.
Generating fewer complaints is one thing. Resolving them quickly is another — and the picture flips in some interesting ways.
Utility Warehouse resolves 83% of complaints by the next working day — the highest in the industry — despite being above the average for complaints volume. EDF resolves 76% and OVO 67%. At the other end, Ecotricity resolves just 12% within a day, and Tru Energy — already the most complained-about supplier — resolves 0% by the next working day. Octopus, widely regarded as a customer service leader, sits below the industry average at just 47% for same-day resolution, suggesting it takes longer to work through complaints even if it generates fewer of them.
The upshot: complaints volume and resolution speed don't always move together. A supplier with fewer complaints isn't necessarily one that handles them well — and vice versa. Both metrics matter when choosing who to switch to.
CEO Jonathan Brearley acknowledged the regulator's own role in the broader service picture:
"Over the last few years Ofgem has had to intervene in light of poor services and poor practice for some suppliers... at times, our past approach has been unwieldy, potentially heavy handed and bureaucratic." — Jonathan Brearley, Ofgem CEO, State of the Market keynote, January 2026
Alongside the report, Ofgem launched a call for input on overhauling its customer service standards — moving from prescriptive rules toward minimum outcomes, with suppliers given more flexibility on how they meet them. The intent is to raise the floor without the bureaucratic overhead. Whether it works is something we'll be watching.
When you're comparing suppliers, you can see complaints per 100,000 customers alongside the tariff price — so you're not just picking the cheapest name on the list. Where the data's available, we surface it. See it in the tracker →
For Q1 2026 (January–March), the price cap equates to an annual spend of £1,758 for a typical dual-fuel direct debit household — up just £3 from the previous quarter but around 2% lower than the same period in 2025.
Wholesale gas prices fell during 2025 as global LNG supply expanded and European storage levels stayed high. But those savings were partially offset by rising government policy costs — including contributions toward the Sizewell C nuclear project and green levies. Networks are also more expensive: Ofgem's RIIO-3 determination approved £28.1 billion in new grid investment, which will add roughly £30 per household per year by 2031 (offset by around £80 in savings from cheaper renewable generation over time).
Prepayment meter customers are in a slightly better position than usual: their equivalent cap sits at £1,711 — lower than direct debit for the first time in several years, reflecting Ofgem's push to end the "prepayment premium."
The 2026 State of the Market report is, in many ways, a story of two energy markets operating in parallel.
For customers who are engaged — shopping around, taking fixed deals, using smart meters, shifting consumption to off-peak times — the market is working better than it has in years. Savings of £200–£300 a year are available to those who look.
For the millions in debt, on prepayment meters, or simply unable to engage with a market that requires constant vigilance, the situation has quietly deteriorated for three years without interruption.
The Debt Relief Scheme is a start. The overhaul of customer service standards may help. But neither addresses the underlying problem: energy costs in Britain remain structurally high, and the people least able to pay are the ones bearing the most of that burden.
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Sources: Ofgem State of the Market: Energy Retail Highlights — January 2026; Ofgem State of the Market: Energy Infrastructure Highlights — January 2026; Ofgem customer service data Q3 2025; Jonathan Brearley keynote speech, January 2026.
Related reading: The Silent Crisis: UK Energy Debt Triples