The government is set to face renewed calls to provide targeted help for households set to be hit with an energy price rise in July, many of whom are already in debt to their supplier
Many households facing an energy price hike in July are already behind with payments to their supplier.
New figures from debt advice service Money Wellness found the amount owed to energy suppliers has soared by 23% over the past three years. Arrears have risen from an average of £1,848 in 2023/24 to £2,270 now. The number of people seeking debt advice who are behind with their energy has increased from one in three to almost half over the same period.
It comes as regulator Ofgem prepares to announce on Wednesday what the level of its price cap for tens of thousands of households from July 1. Industry experts Cornwall Insight predicts Ofgem’s cap will jump by more than £200 a year, from the current £1,641 annual bill to £1,850.
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Yet Money Wellness says many households have not recovered financially from earlier price shocks.
Large numbers are still repaying arrears built up during the Covid pandemic years and subsequent cost of living crisis, leaving little flexibility in monthly budgets even as headline prices stabilise
Rebecca Lamb, head of external relations at Money Wellness said: “Energy prices may have come down from their peak, but energy debt has not followed the same path. Many households are still repaying significant arrears built up over recent years, and those repayments continue to put pressure on already stretched budgets.
“Even a modest increase in the price cap risks pushing some households into further difficulty, particularly where there is already outstanding debt on the account.”
Money Wellness is calling for the introduction of a national, automatically applied social tariff for energy (similar to the water scheme), arguing that current support schemes are fragmented and difficult for households to access.
Based on its analysis of customers in energy arrears, the organisation estimates that up to 87% of cases could meet eligibility criteria for a social tariff, including receipt of means-tested benefits, disability benefits, evidence of problem debt, or high essential energy use.
It says this highlights the need for a consistent system that provides automatic protection, rather than one that relies on households applying for support.
Confirmation the increased energy price cap is likely to lead to fresh calls for government to provide targeted help.
Cat Hobbs, director at the groupWe Own It, said: “The government can create a publicly owned energy retailer as a low-cost option for households. A publicly owned supplier can cut energy bills by relying on homegrown renewable energy as well as reinvesting profits into cutting bills.
“It is also time to rethink the private ownership of our energy grid. Across the sector, energy companies made £23.1billion in profits last year, at a time when household energy bills were going up, and families were being squeezed on all fronts.
“Reinvesting profits that are currently being paid out to shareholders into cutting bills could go a long way to cut our energy bills and save people from falling further into fuel poverty.”
