Households with energy debt are being warned they could face an additional £395 on their bills, as new figures reveal the scale of unpaid arrears across the UK. Industry group EnergyUK has reported that households collectively owe £6 billion in unpaid energy debt and arrears, a figure that is adding around £50 a year, or roughly 3%, to a typical annual bill.
Separate analysis from Money Wellness shows that customers in debt now owe 19% more than they did three years ago, with the average arrears rising from £2,037 to £2,432. This represents a £395 increase per household, according to the debt advice charity.
Debt levels rising despite fewer people seeking help
Sebrina McCullough, director of external relations at Money Wellness, said: “The fact that fewer people are now turning to us with energy debt might sound like good news, but there is another story underneath the headline.”
“The people who are still in energy debt owe more than they did three years ago, and they are much more likely to be vulnerable, out of work, supporting children and reliant on benefits,” she added.
Ms McCullough explained that households who have been able to recover are clearing their arrears, while those being left behind are facing much deeper affordability problems. She said: “It looks increasingly like the households who have been able to recover are clearing their arrears, while those being left behind are facing much deeper affordability problems.”
Price cap announcement critical for vulnerable households
Ms McCullough stressed the importance of the upcoming price cap announcement, noting that these households have already absorbed years of higher energy, food and household costs. “Their financial resilience has been worn down, and there simply isn't much left to absorb another increase,” she said.
“We’re warning now, before the announcement, because people shouldn’t wait for another wave of arrears to build before they act,” she added.
EnergyUK has warned that the total debt figure is likely to reach £7 billion by the end of the year without intervention.
Government scheme stalled as wholesale prices soar
Regulator Ofgem has been looking at options to help indebted consumers, but a scheme to clear £500 million of debt for the poorest customers, which needs government legislation, has stalled.
Wholesale energy prices, which have soared this year due to the Iran war, are the largest single factor contributing to the domestic price cap. The cap is set on a quarterly basis using a formula that also reflects suppliers' network costs and environmental and social levies.
The combination of rising wholesale costs and stalled government support means households already in arrears face an increasingly difficult financial position, with the next price cap announcement set to be a key moment for those struggling to keep up with their energy bills.
