Household energy debt has reached £6bn, and further increases are expected ahead of a predicted bill rise this winter, according to new analysis from Energy UK, the main trade association for the energy industry.
The figures show that more than three million households are now in debt to their supplier, owing an average of £1,800. Energy UK warns that overall energy debt is still on track to hit £7bn by the end of the year, and is calling for a social discount to help low-income, disabled or vulnerable households struggling with high energy costs.
Debt mountain climbing higher
Earlier this year, the industry body reported that bad debt was adding an extra £50 a year to the typical bill for customers under the price cap. Energy UK's chief executive, Dhara Vyas, said: “We made a stark warning about customer debt earlier this year and voiced fears that without urgent action, what was already a crisis would deteriorate further.”
“Unfortunately, those warnings are proving all too accurate – the debt mountain is climbing higher, causing immense worry to many customers, adding growing costs to everyone’s bills and threatening suppliers' financial viability.”
Price cap announcement due
The warning comes as energy bills are expected to rise again this winter, with Ofgem set to announce its next price cap on Wednesday. Forecasts currently suggest another 4% rise in energy bills, following a 13% rise that already hit households in July.
The price cap sets the unit rates you can be charged for energy, plus your standing charges, but does not set a total cap for how much you will pay. The price cap is currently £1,663 a year for those with typical energy consumption who pay by direct debit, but analysts at Cornwall Insight say this could rise to £1,729 in October.
Ofgem updated how it calculates its price cap in July to reflect that people are using less energy now to save money. Based on its old definition of a typical household, the price cap now would be £1,862 a year, and the forecast rise for October is £1,941. The next price cap announcement will cover October to December.
What to do if you're in energy debt
If you are in energy debt, the first thing you should do is speak to your supplier to see what help could be available. They should be able to offer tailored support, such as a payment plan, payment breaks and affordable debt repayments.
Not paying your gas or electricity bill can affect your credit score and, in severe cases, can result in court action and visits from debt collectors. Your supplier should also be able to tell you if you are entitled to any help, as most of the big energy firms have charitable hardship funds and grants you may be eligible for.
The British Gas Energy Trust offers grants worth up to £1,700 to help people clear their debt, and it is possible to access this help even if you are not a British Gas customer. There are also Government help schemes, such as the Warm Home Discount, which gives you £150 off your electricity bill if you are claiming certain means-tested benefits.
Winter Fuel Payments are worth up to £300 and are paid to pensioners who have a taxable income of less than £35,000.
