Households could face a one-off charge of £17 a year to help prevent energy suppliers from going bust.
Ofgem says rising prices and the cost of living crisis meant consumers were £2.6bn in debt over the summer – a record high – piling pressure on businesses.
The energy regulator argued that consumers could end up facing even higher costs and poorer standards of service unless action is taken.
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About 30 suppliers went out of business during the energy crisis – at a cost of about £82 to every single customer.
A consultation has now been launched on the proposals, which would add a further £1.50 a month to bills.
Ofgem stressed that any increase would be delayed until April to shield consumers from rising costs during the winter.
Tim Jarvis, the regulator’s director general for markets, said: “We know that households across the country are struggling with wider cost of living challenges, including energy, so any decision to add costs to the price cap is not one we take lightly.
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“However, the scale of unrecoverable debt and the potential risk of suppliers leaving the market or going bust, which passes on even greater costs to households, means we must look at all the regulatory options available to us.”
In other developments, Energy UK – which represents the industry – has announced that 14 suppliers have agreed to provide better support to households falling behind on their bills, including the likes of British Gas and Octopus.
They are pledging to offer additional financial help, training for customer service staff talking to callers with debt problems, and proactively identify those struggling to keep up with bills.
“Our industry recognises the challenges many customers are facing, and suppliers that serve homes across the country have invested in different ways to support them,” Energy UK’s deputy director Daniel Portis said.
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But Simon Francis, from the End Fuel Poverty Coalition, is calling on the government to step in to help customers pay off energy debts.
He said: “Households are struggling under the huge weight of energy debt which has been caused through no fault of their own, but by rising prices.
“All this time, energy firms have continued to profit from the misery of people racking up debt and living in cold damp homes.
“Rather than pass on more increases to energy bills, the government needs to work with energy firms to introduce a ‘help to repay’ scheme to help get Britain’s households back on to an even keel.”
