British Gas has issued a serious warning to its 8 million customers over a growing problem of household energy debt. The energy supplier's parent company, Centrica, revealed that the amount owed by residential customers surged to £1.04 billion last year, up from £799 million the previous year.
Rising debt levels
Centrica, which supplies 7.9 million homes, said that British Gas earnings will be at the lower end of its previous guidance due to what it described as "continued challenges in residential energy bad debt collection." The company attributed the increase to the cost of living crisis, higher energy bills, and mixed macroeconomic conditions that continue to affect customers' ability to pay.
The suspension of prepayment meter fitting activities has also contributed to the accumulation of overdue debt, the company added.
Government action needed
Kevin O'Byrne, chairman of Centrica, told shareholders that energy affordability and debt represent "a serious and growing challenge" that requires government intervention. He called for "joined-up action across government, the regulator, suppliers, and the charity sector" to address the debt problem.
"We need to be helping those who genuinely cannot pay, while ensuring those who can pay do pay, so that debt does not continue to build and the financial resilience of the energy market is maintained," O'Byrne said.
Industry-wide impact
EDF, which supplies three million households, previously reported that one in four of its customers carry some debt. An EDF spokesman described the current situation as "totally unsustainable" and called for reforms to ensure that those who can afford to pay do so.
Claire Coutinho, the Conservative Party shadow energy secretary, warned that everyone suffers when energy debts rise because the cost is spread across all customers' bills. She criticized the government's failure to tackle the root cause of soaring energy bills, which she attributed to Ed Miliband's policies.
A spokesman for the Labour Party government responded by stating that they are working urgently with Ofgem to drive debt out of the system, including proposals for a potential Debt Relief Scheme.
