Soaring energy prices have seen the number of customers in debt or behind with their repayments rocket in recent years to a new all-time high
Brits are now almost £4.8billion in debt to energy suppliers as households buckle under the weight of sky high bills.
Latest figures from regulator Ofgem showed the debt mountain rose by another £240million, or 5%, to another record high in the first three months of this year..
And things could get even worse as Ofgem’s price cap increases by 13% to £1,862 a year from Wednesday next week for the typical dual fuel household that pays by direct debit. This marks an increase of £221, or £18 a month, based on the current price cap figure of £1,641.
Ofgem said “affordability challenges” are the key reason for the relentless rise in debts, alongside what it said were high levels of historical debt and “industry processes”. Most households – whether they owe money to their supplier or not – ultimately pick-up the tab through a typical £50 added to the average annual bill.
Ofgem said the average number of electricity accounts in debt has risen by another 3% to 852,000, and up 4% to 710,000 on gas. The overall amount owed differs depending on whether someone in debt has agreed a plan with their supplier to clear what they owe.
For those who haven’t, the average amount owed for electricity is £1,876, having rocketed from £587 a decade ago. For gas it is £1,623, up from £558 at the start of 2016.
The amounts owed are much less where customers have a repayment plan in place – £828 for electricity and £679 for gas – though both are also at a record high. More than 1.1 million electricity accounts and over 900,000 for gas are behind with their payments yet don’t have such as repayment plan in place, with many of those battling to make ends meet with no help.
The overall debt pile has more than quadrupled since 2018, from just under £1.1billion to £4.79billion now. Of that, most is customers who are at least three months behind with payments.
James Mabey, policy analyst at the charity National Energy Action, said: “It is deeply worrying that Ofgem’s latest figures show energy debt has risen again to a new record high. For the households National Energy Action supports, the consequences of energy debt include cold homes, rising anxiety and impossible choices about essentials. This debt has built up because bills have gone beyond what many low-income households can afford, and its effects are not limited to those already in arrears.
“Allowing debt to persist builds additional costs into future price caps, while also increasing the risk of more harmful responses such as households having prepayment meters forcibly installed. It also risks excluding low-income households from the benefits of wider market reform, including the opportunities linked to smarter tariffs and home upgrades. The right response is to scale debt relief. As our new paper, Clearing the Decks, sets out, that means enabling and expanding Ofgem’s Debt Relief Scheme with additional funding so more of this debt can be cleared, reducing harm and lowering costs across bills.”
Gillian Cooper, director of energy at Citizens Advice, said: “It is extremely worrying that energy debt has again grown to record levels, but it’s not a surprise. At Citizens Advice, we’ve seen a staggering 70% increase in the number of households we support with energy debt since 2021. Soaring debt is hurting vulnerable households and ultimately driving up the costs of everyone’s bills.
“The government needs to act to make sure these record levels don’t continue to spiral. It should support Ofgem to finally introduce the long-delayed Debt Relief Scheme to help millions in need of support. And, while it may seem a long way away during a heatwave, the Government must ensure its ready to help people with targeted support this winter. That will bring relief to the 9.4 million households worried about paying their bills when the cold and wet weather returns.”
Ofgem says it is moving to tackle one of the biggest causes of why energy debts build up, accounting for around a third of historical debt, and intends to publish proposals later this summer. At the moment, when a suppliers becomes aware a billpayer has left a property, the account is switched to “the occupier”. The energy supply continues and the money owed. This can cause an issue for whoever moves in and until they register as the new occupier. Ofgem says this contrast to the process followed in many other countries and sectors, where householders are required to set up accounts before getting a supply.
Neil Kenward, from Ofgem said: “Energy debt is continuing to rise, putting pressure on households facing the stress of debt, increasing costs for bill payers, and limiting the industry’s ability to invest and innovate.
“This is a complex, industry-wide issue, that needs to be addressed with a balanced and coordinated programme of activity across the industry, including from Ofgem, government, suppliers, and community groups and charities in order to stabilise debt levels.
“Our priority is creating a system that is fair for everyone. We are taking regulatory action where we can by reforming the home movers process, and looking at the right support and better targeting for those households that need it most. We are also driving higher standards of service from suppliers to ensure those struggling get the right support, while enabling safe, responsible debt recovery.”
