Domestic customer energy debt has hit a record £6 billion in the first half of this year, new figures have revealed. The statistics from Energy UK show that debt is set to hit £7 billion before the end of 2026.
It comes as the next Ofgem energy price cap is set to be announced on Wednesday (August 26) with industry analysts expecting an increase from £1,663 to £1,730 per year for the final quarter of the year. Energy UK is now warning that the “energy debt mountain is climbing higher” which is adding to the costs of everyone’s bills. According to the figures, over three million customers are now in debt or arrears and the average amount owed is roughly £1,800.
Energy UK is now calling for action to help customers who are struggling to pay their debts. They have proposed a “social discount” which uses specific data to ensure Brits get the right flexibility to reflect changing prices.
Other measures include increased use of smart pay-as-you-go meters and new regulations when people move into new homes. It is believed that arrears represent around 75% of all unpaid energy bills which mean repayment plans are not in place.
Ofgem previously revealed that it was adding an extra £50 a year to typical dual fuel customers under the price cap as debt is recovered from all energy bills. If total debt does reach the £7 billion mark, this could add a further £10-£15 to bills.
Energy UK’s chief executive Dhara Vyas, said: “We made a stark warning about customer debt earlier this year and voiced fears that without urgent action, what was already a crisis would deteriorate further.
“Unfortunately, those warnings are proving all too accurate – the debt mountain is climbing higher, causing immense worry to many customers, adding growing costs to everyone’s bills and threatening suppliers’ financial viability.”
She continued: “Persistently high energy bills over the last few years have meant many households have accumulated debt that they have little chance of paying off – given that affording their latest bill will be challenging enough.
“Ofgem’s proposed debt relief scheme recognises the need for intervention with such customers but it’s over two years since it was first proposed and risks being too little, too late.
“It is just as important to tackle the causes of debt by supporting households in need with a social discount scheme – as we outlined earlier this week. Other measures like greater use of smart pay-as-you-go and new regulations around new homeowners and tenants would also prevent customers from building up debt.
“The industry has been raising the alarm about debt for some time now and if these warnings continue to be ignored, then nobody should be surprised by the consequences.”
A Department for Energy Security and Net Zero (DESNZ) said: “We’ve cut VAT on electricity to give families breathing space and the Energy Secretary will work to bring down bills for good.
“We are working closely with Ofgem to consider a range of options to reduce energy debt in the system and understand the impacts of different approaches on consumers.”
