Domestic customer energy debt in the UK has reached a record £6 billion in the first half of this year, according to new figures from Energy UK. The organisation projects that debt will climb to £7 billion before the end of 2026.
Price cap expected to rise
The next Ofgem energy price cap is set to be announced on Wednesday, August 26, with industry analysts expecting an increase from £1,663 to £1,730 per year for the final quarter of the year.
Energy UK warns that the “energy debt mountain is climbing higher,” adding to the costs of everyone’s bills. The figures show that over three million customers are now in debt or arrears, with the average amount owed roughly £1,800.
Proposed measures to tackle debt
Energy UK is calling for action to help customers struggling to pay their debts, proposing a “social discount” that uses specific data to ensure Brits get the right flexibility to reflect changing prices. Other measures include increased use of smart pay-as-you-go meters and new regulations when people move into new homes.
Arrears represent around 75% of all unpaid energy bills, meaning repayment plans are not in place. Ofgem previously revealed it was adding an extra £50 a year to typical dual fuel customers under the price cap as debt is recovered from all energy bills. If total debt reaches £7 billion, this could add a further £10-£15 to bills.
Industry warnings
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.”
She continued: “Persistently high energy bills over the last few years have meant many households have accumulated debt that they have little chance of paying off – given that affording their latest bill will be challenging enough.”
“Ofgem’s proposed debt relief scheme recognises the need for intervention with such customers but it’s over two years since it was first proposed and risks being too little, too late.”
“It is just as important to tackle the causes of debt by supporting households in need with a social discount scheme - as we outlined earlier this week. Other measures like greater use of smart pay-as-you-go and new regulations around new homeowners and tenants would also prevent customers from building up debt.”
“The industry has been raising the alarm about debt for some time now and if these warnings continue to be ignored, then nobody should be surprised by the consequences.”
A Department for Energy Security and Net Zero (DESNZ) spokesperson said: “We’ve cut VAT on electricity to give families breathing space and the Energy Secretary will work to bring down bills for good.”
“We are working closely with Ofgem to consider a range of options to reduce energy debt in the system and understand the impacts of different approaches on consumers.”
