Millions of UK households are bracing for another increase in energy costs this July, with many already grappling with mounting arrears to their suppliers. The government is expected to face renewed pressure to introduce targeted financial support for those most affected.
New data from the debt advice service Money Wellness reveals that the average amount owed to energy suppliers has surged by 23% over the past three years, climbing from £1,848 in 2023/24 to £2,270 today. The proportion of individuals seeking debt advice who are behind on their energy bills has also risen sharply, from one in three to nearly half over the same period.
Ofgem Price Cap Set to Rise
The warning comes ahead of Ofgem's announcement on Wednesday regarding the new price cap level for millions of households, effective from July 1. Industry analysts at Cornwall Insight predict the cap will jump by more than £200 annually, increasing from the current £1,641 to approximately £1,850 per year.
Financial Strain Persists
Money Wellness highlights that many households have yet to recover from previous energy price shocks. Large numbers are still repaying debts accumulated during the Covid-19 pandemic and the subsequent cost-of-living crisis, leaving minimal room in monthly budgets even as headline energy prices have stabilised.
Rebecca Lamb, head of external relations at Money Wellness, commented: “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.”
Calls for a Social Tariff
Money Wellness is urging the introduction of a national, automatically applied social tariff for energy, similar to the existing water scheme. The organisation argues that current support mechanisms are fragmented and difficult for households to access. Based on its analysis of customers in energy arrears, it 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. This underscores the need for a consistent system that provides automatic protection rather than relying on households to apply for support.
Public Ownership Proposal
The anticipated confirmation of the increased energy price cap is likely to intensify calls for government intervention. Cat Hobbs, director of the group We 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 £23.1 billion 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.”
