Britons find themselves in a collective £4.8 billion debt to energy suppliers due to the burden of escalating bills. Recent data from Ofgem reveals that the debt total surged by £240 million, a 5% increase, reaching a new high in the first quarter of this year.
The situation may worsen with Ofgem’s planned 13% price cap hike to £1,862 yearly for typical dual fuel homes on direct debit starting next week. This translates to a £221 rise, equivalent to £18 extra each month based on the current cap level of £1,641.
Ofgem attributes the mounting debts to affordability struggles, existing high levels of past debt, and industry processes. This financial strain impacts most households, whether they owe money to their supplier or not, leading to an average annual bill increase of around £50.
The number of electricity accounts in arrears climbed by 3% to 852,000, while gas accounts in debt rose by 4% to 710,000. The owed amounts vary depending on whether a repayment plan is in place, with average outstanding electricity debt at £1,876 and gas debt at £1,623 for those without a plan.
Customers with a repayment arrangement owe less on average – £828 for electricity and £679 for gas – but both figures mark a record high. Over 1.1 million electricity accounts and more than 900,000 gas accounts are behind on payments without a structured repayment plan, struggling to manage their finances.
The overall debt sum has quadrupled since 2018, surging from under £1.1 billion to the current £4.79 billion. The majority of this debt involves customers at least three months behind on payments.
James Mabey, a policy analyst at National Energy Action, expressed concern over the escalating energy debt, highlighting its adverse effects on households, including cold homes and financial strain. Mabey emphasized the need for debt relief schemes to alleviate the burden on low-income households and minimize future costs.
Gillian Cooper, the energy director at Citizens Advice, echoed these concerns, emphasizing the urgent need for government intervention to address the soaring energy debts. Cooper urged for the implementation of the long-delayed Debt Relief Scheme and targeted support to assist households in financial distress, particularly as the winter season approaches.
Ofgem is taking steps to address the root causes of energy debt escalation, with plans to publish proposals later this summer. The regulator aims to stabilize debt levels through coordinated efforts across the industry, government, suppliers, and charitable organizations.
Neil Kenward from Ofgem stressed the need for a balanced approach to tackle rising energy debt, emphasizing fair treatment for all consumers. Ofgem is working on regulatory reforms, support targeting, and enhanced supplier services to aid struggling households in managing debt responsibly.