Experts are cautioning that Britain is on track to hit a significant milestone with energy debt soaring to an alarming £5 billion by the upcoming Christmas season. The continuous surge in energy prices over the years has resulted in numerous households struggling to meet their energy bills, leading to a backlog in payments. The recent price hike, with Ofgem’s price cap climbing to an average of £1,755 annually at the beginning of October, has exacerbated the situation.
In the period from March to June this year, Ofgem reported the energy debt at £4.4 billion. However, industry experts anticipate this figure to surpass £5 billion by the year-end. The mounting debt burden impacts all households, as suppliers are permitted to recoup debt-related expenses through overall bills within Ofgem’s price cap framework, currently equating to £52 per customer over the following year.
Simon Francis, coordinator of the End Fuel Poverty Coalition, expressed concern over the escalating crisis, emphasizing the hardships faced by millions of individuals during the colder months. To address this issue, he proposed urgent measures, highlighting the necessity of a national debt relief scheme to alleviate unmanageable arrears, potentially funded through energy networks’ excess profits or levying a windfall tax on the energy sector.
Andrew Ward, the chief executive of Scottish Power’s customer business, raised alarms regarding the uncontrollable rise in energy debt, projecting a £5 billion milestone by Christmas. The situation is exacerbated by a significant increase in the number of households indebted to their providers, as reported by a study from Uswitch.com, indicating a 46% surge from the previous year.
Ben Gallizzi, an energy expert at Uswitch.com, expressed apprehension over the current surge in household energy debt, cautioning about potential bill shocks as direct debit levels are adjusted. He attributed this spike to the diminishing government support, leading many households to fall behind on payments. Gallizzi advised households in debt to promptly engage with their suppliers for assistance.
In response to the escalating energy debt crisis, an Ofgem spokesperson emphasized the need for collaborative action from regulators, the government, and the industry. They stressed the importance of targeted support for customers in need while encouraging those capable of payment to fulfill their energy obligations. Ofgem is actively developing plans for a debt relief scheme to aid struggling households in addressing accumulated debts resulting from the crisis.
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