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Households owe record £206 to suppliers before winter energy price rises begin

energy price cap electricity bills debt
energy price cap electricity bills debt

Existing debt to energy providers will immediately swallow up half of Rishi Sunak’s cost of living crisis payment to households.

According to price comparison site Uswitch, six million households owe an average of £206 to providers. This figure is 250pc more than in September last year.

Overall, households owe a record sum of £1.3bn to energy suppliers, even though summer is usually a time when households build up their credit ahead of higher winter bills.

Mr Sunak’s cost of living payment, announced in May when he was chancellor, promised a minimum non-repayable grant of £400 to ease the impact of soaring energy bills. However, households will be left with less than half of this after existing debts to suppliers are paid off.

Uswitch said the number of homes in credit had dropped from 11 million to nine million since April, and now eight million households have no credit balances at all, leaving them most exposed to higher bills.

Regulator Ofgem will announce the new level of price cap on August 26, and last week it confirmed it would review the cap every three months instead of six. The cap is predicted to rise to £3,582 a year from October, according to figures from analyst Cornwall Insight. In January, it is forecast to rise even further – to £4,266.

This will far outstrip government support packages. Further payments have been made available for those in receipt of Universal Credit or Winter Fuel Payments, in addition to the £150 council tax rebate announced at the start of the year for homes in bands A to D.

The then chancellor Mr Sunak’s £1.5bn cost of living support package was announced at a time when analysts predicted the price cap, which limits how much energy providers can charge consumers for their energy usage, would hit £3,000 in October. Experts have called for the Government to provide greater support.

Justina Miltienyte, of Uswitch, said the spike in energy debt had turned this winter’s price rise into “a deeply precarious situation for many households” and that the cost of living crisis had squeezed family finances “in all areas”.

“Our data shows that while a similar proportion of people are in debt as in April – people now owe approximately 10pc more than just four months ago to their energy suppliers,” she said.

Ms Miltienyte urged consumers to speak to their energy provider “as soon as possible” to enquire about a more affordable payment plan. Households may also be entitled to additional support such as hardship funds and other energy help schemes, she added.

“The Government also needs to take energy debt seriously ahead of the winter,” Ms Miltienyte said. “A greater support package for vulnerable households needs to be agreed as a priority.”

Ofgem said its decision to revalue the price cap every three months was intended to prevent a repeat of last year’s crisis when a wave of energy firms collapsed. The wholesale energy market is moving so rapidly suppliers are struggling to buy energy.