Britons are currently facing a collective debt of nearly £4.8 billion to energy providers as households struggle to cope with soaring energy bills.
New data from regulatory body Ofgem reveals that the total debt has surged by £240 million, representing a 5% increase, reaching a new peak 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 annually from the following week for typical dual fuel households paying via direct debit. This increment translates to an additional £221 per year or £18 per month compared to the current cap of £1,641.
Ofgem attributes the escalating debts to affordability issues, existing high historical debt levels, and industry procedures. Ultimately, most households, whether indebted to their supplier or not, end up bearing the cost through an average of £50 added to their yearly bills.
The number of electricity accounts in debt has increased by 3% to 852,000, while gas accounts in debt rose by 4% to 710,000. The outstanding amounts vary based on whether a repayment plan has been agreed upon with the supplier to settle the debt.
Customers without a repayment plan owe an average of £1,876 for electricity, a significant increase from £587 a decade ago, and £1,623 for gas, up from £558 in early 2016.
For those on a repayment plan, the average debt stands at £828 for electricity and £679 for gas, both reaching record highs. Over 1.1 million electricity accounts and more than 900,000 gas accounts are behind on payments without a structured repayment plan, posing financial challenges for many.
The overall debt has quadrupled since 2018, climbing from under £1.1 billion to the current £4.79 billion, with a majority of customers being at least three months overdue on payments.
In response to the escalating energy debts, James Mabey, a policy analyst at the charity National Energy Action, emphasized the need for debt relief measures to alleviate the financial burden on households. Gillian Cooper, energy director at Citizens Advice, echoed concerns over the record debt levels and called for government support to implement the long-delayed Debt Relief Scheme to assist those in need.
Ofgem is actively addressing the root causes contributing to the mounting energy debts and plans to unveil proposals later this summer. Neil Kenward from Ofgem stressed the importance of collaborative efforts across the industry, government, suppliers, and community organizations to stabilize debt levels and ensure fair treatment for all consumers.