Britons are currently facing a collective energy debt of nearly £4.8 billion, with households struggling to cope with soaring energy bills. Recent data released by the regulatory body Ofgem revealed that the amount owed to energy suppliers increased by £240 million, reaching a new high in the first quarter of this year.
The situation is expected to worsen as Ofgem’s price cap is set to rise by 13% to £1,862 per year starting next week for typical dual fuel households using direct debit. This represents an increase of £221 compared to the current cap of £1,641.
Ofgem attributed the escalating debts to affordability challenges, high levels of historical debt, and industry processes. The burden of these debts is ultimately shared by most households through an average annual bill increase of £50.
The number of electricity accounts in debt rose by 3% to 852,000, while gas accounts in debt increased by 4% to 710,000. The average outstanding amount for electricity without a repayment plan surged to £1,876 from £587 ten years ago, and for gas, it rose to £1,623 from £558 in early 2016.
Customers with repayment plans in place have lower average debts – £828 for electricity and £679 for gas, but these amounts are still at record levels. Over 1.1 million electricity accounts and more than 900,000 gas accounts are in arrears without a repayment plan, struggling to manage their payments.
The total debt has quadrupled since 2018, rising from under £1.1 billion to the current £4.79 billion, with a significant portion owed by customers who are at least three months behind on payments.
James Mabey, a policy analyst at the charity National Energy Action, expressed concern over the record-high energy debt levels, emphasizing the detrimental impact on households, including cold homes and heightened anxiety. He called for increased support and funding to clear the mounting debt and alleviate the financial strain on vulnerable households.
Gillian Cooper, the director of energy at Citizens Advice, echoed these concerns, highlighting the need for urgent government action to address the escalating energy debt crisis. She emphasized the importance of implementing support schemes to assist struggling households, particularly as winter approaches.
Ofgem announced plans to address the issue of accumulating energy debts, particularly concerning the home movers process, which contributes significantly to historical debt accumulation. The regulator emphasized the need for a coordinated effort across the industry, government, suppliers, and community groups to stabilize debt levels and ensure fair treatment for all consumers.