Energy debt tipped to soar - and we’re all paying the price

Household energy debt has been tipped to grow this year - and that could have a knock-on effect on everyone’s bills.

According to Energy UK, more than three million customers are now in energy debt or arrears, with the average household owning about £1,800.

And overall, household energy debt is expected to reach £7bn by the end of the year.

Why we’re all paying the price of energy debt

Energy UK is concerned because recovering bad debt from energy bills adds an extra £50 a year to typical dual fuel customers under the price cap.

Meanwhile, standard credit customers are paying around £140 because of the debt allowance built into tariffs.

So it’s concerned that if total debt does reach £7bn, it could push up bills by £10-£15.

At the same time, Energy UK is warning that the cost of bad debt is hard to cover for energy suppliers and threatens their financial stability.

This, it says, in turn harms their ability to lower bills and invest in better services.

What can be done to help struggling households?

Energy UK wants action to be taken to help those households who are unlikely to be able to pay off arrears.

In particular, it’s calling for the introduction of a ‘social discount’, with data on people’s income, health and energy consumption used to ensure they get the help tailored to their circumstances.

Energy UK has also proposed measures that it believes could tackle the causes of energy debt, such as making greater use of smart pay-as-you-go meters and new regulations when people move into new properties.

The organisation added that Ofgem also needs to make progress with its “long-delayed” debt relief scheme - a proposal that could see up to £500m of energy debt written off.

Why we want a social tariff

Money Wellness agree that more needs to be done to support struggling households.

That’s why we’ve been calling for a national social tariff that would automatically reduce bills for those who are eligible.

A targeted, automatic and consistent social tariff would not only be fairer, but also stop people falling into debt in the first place.

More than four in ten (42%) of the people we support come to us with gas and electricity arrears.

And based on our analysis, around 87% of these households could potentially meet common eligibility criteria for a social tariff, such as receiving means-tested benefits, disability benefits or experiencing financial hardship.

What can I do if I’m worried about energy bills?

If you’re struggling to keep up with your gas and electricity bills, there are steps you can take.

Speak to your supplier

Contact your supplier as soon as possible, as they might be able to offer payment plans, grants and advice on managing your account.

See what benefits you can claim 

Use our benefits calculator or give us a call to find out if you’re eligible for any financial support.

Ask for help with your debts

If you’re feeling weighed down by debt, contact us for confidential, practical and impartial debt advice.

Create a household budget

Work out exactly how much money you’ve got coming in each month and where it’s going, so you can prioritise essential bills and see where savings can be made.

Check our guide to creating a budget to find out more.

Try to save energy at home

Small changes like not overfilling the kettle and turning lights off in empty rooms can lead to big savings.

Check our list of 50 smart energy-saving tips for more easy ways to bring down your energy bill.