Campaigners are calling for urgent action amid warnings that the amount owed by energy customers will leap by £600million in the space of six month
Britain’s energy debt mountain is set to reach a “shocking milestone” of £5billion by Christmas, experts have warned.
Years of rising energy prices have seen millions of households battling to afford their bills and falling behind with payments. The latest increase came at the start of October when regulator Ofgem’s price cap rose to an average £1,755 a year.
Ofgem put the size of the debt at £4.4billion in March to June this year. But industry chiefs predict it will top £5billion by the end of this year.
The ever-increasing amount means all households pay more, whether they are in debt or not. Suppliers are allowed to claw back their debt-related costs through all bills as part of Ofgem’s price cap mechanism. It is currently £52 per customer over the next 12 months.
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “This is a shocking milestone that shows just how deep this crisis has become. Behind the numbers are millions of people dreading the colder months, cutting back on food and warmth, turning to loan sharks or falling into dangerous levels of debt just to keep the lights on.
“To bring this debt mountain down, we need urgent action. At the heart of this must be the national debt relief scheme proposed by Ofgem to write off unpayable arrears and paid for via the energy networks’ excess profits or the windfall tax on the energy industry.
“But debt write-offs will not be enough alone. As long as energy bills stay high, people will suffer. “That’s why we need longer-term moves to cut bills and prevent debt recurring, including a national social tariff, fairer standing charges and pricing structures and a major programme of home energy efficiency upgrades and homegrown renewables.”
Andrew Ward, chief executive of supplier Scottish Power’s customer business, told MPs last week: “Energy debt is going to reach £5billion by Christmas – it is out of control, completely out of control. The reality is we have people who are unable to pay their energy bills at all.”
Separate research from the website Uswitch.com found 3.5 million households currently owe money to their provider, up 46% from 2.4 million last year. From its survey, one in 10 households in debt to their supplier said they could not afford to pay it off, double the proportion from last year.
Ben Gallizzi, energy expert at Uswitch.com, said: “It’s deeply concerning to see that household energy debt has soared to an eight-year high, which suggests that many homes may face a bill shock soon as direct debit levels are updated. The cost of living squeeze and the end of many government support schemes means that households are getting less help than they used to, causing many to fall behind. If your energy account is going into debt, or you are behind on your bill payments, speak to your supplier as soon as possible.”
An Ofgem spokesperson said: “The current levels of energy debt are unsustainable, and this is a challenge that requires action from everyone – the regulator, government, and industry alike. It’s important we target support at the customers that need it most, while also ensuring people who are able to pay are supported to do so.
“We know allowing households to build up unsustainable debt isn’t the right thing to do, and it’s vital that people pay for the energy they use as increasing levels of debt drive up costs for everyone. If a customer is struggling they should speak to their supplier about the options that could help them get back on track. These could include tailored repayment plans, which can help households regain control and avoid falling further behind.
“We’re also working at pace on plans to introduce a debt relief scheme that could help struggling households get back on track and rectify some of the debt that built up as a result of the crisis.”