The amount of money British households owe their energy suppliers jumped to a record £2.6 billion ($3.2 billion) this summer due to surging wholesale prices and the rising cost of living.
(Bloomberg) — The amount of money British households owe their energy suppliers jumped to a record £2.6 billion ($3.2 billion) this summer due to surging wholesale prices and the rising cost of living.
With the increase in bad debt levels expected to continue, regulator Ofgem said Thursday it’s considering adding a one-time adjustment to the April energy price cap to reduce the risk of suppliers going bust or leaving the market as a result of unrecoverable debt. Proposals under consideration would add an average of £17 to all bills.
“Worryingly, more households are running up energy debts during the warmer months, with some having to borrow money to try and keep the lights on,” said Clare Moriarty, chief executive of Citizens Advice. “An increase in the price cap to pay for higher debts will make people’s bills even more unaffordable.”
UK energy bills fell slightly in October, but households could still face rising costs in the coming months, following the phase-out of government support. Estimates show that one in three homes will pay higher bills, putting pressure on the government to do more to help offset the cost-of-living pressure.
Read More: UK Homes in Energy Bill Debt Surges 36% This Year, EDF Says
Ofgem will now consult industry, consumer groups and the public. There have been calls from lawmakers and energy suppliers for a social tariff to be introduced to lower bills for vulnerable customers.
In response, 14 energy suppliers have pledged to provide immediate assistance to households in debt, including “substantial” additional financial support, lobby group EnergyUK said. The group is calling on the government to commit to targeted financial support for households on means-tested and disability benefits for this winter.
“We cannot solve this on our own,” Daniel Portis, deputy director at Energy UK, said. “Even with every support option that suppliers have to offer, there is potential for many customers to struggle to pay for their energy.”
(Updates with details from third paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.