UK household energy debt doubles to £1bn

·Business Reporter, Yahoo Finance UK
·4-min read
An energy meter, an electricity bill and some notes are seen in a family home in Manchester, Britain
Energy crisis: The number of households in debt stood at more than two million higher than at any point in the last four years, and the average debt is 54% higher than it was in 2019. Photo: Jon Super/Xinhua via Getty Images

The amount of money that UK households collectively owe to their energy suppliers has doubled in the past year to £1bn, with a quarter (23%) of consumers now in energy debt.

According to new data from Uswitch, as many as 6 million households owe an average of £188 to their energy provider amid a sharp cost of living squeeze already affecting spending and personal finances.

The total number of homes in debt to their supplier has risen by half (52%) compared to this time last year, the data showed.

The number of households in debt stood at more than 2 million higher than at any point in the last four years, and the average debt is 54% higher than it was in 2019.

Uswitch added that almost 11 million households have £1.4bn in credit balances, with more than 1 million bill-payers owed over £300.

Overall credit is £500m lower than last year, with rising energy prices preventing people from building up a nest egg of credit.

Read more: European markets gain as energy firms set to cave in to Russia

The research revealed that out of Britain's largest energy providers, Octopus Energy had the biggest proportion of customers in debt at 33%, while OVO had the most in credit at 50%. EDF had the highest proportion of customers with neither debt or credit (39%).

“Rising bills mean that many consumers are taking a different approach to their credit balances,” Uswitch said.

Rather than asking their supplier for their credit balance to be returned, two thirds of people in credit (66%) said they were going to leave the money with their supplier to help manage their monthly bills.

Meanwhile, only one in 10 (10%) intend to ask their supplier to return some of their credit.

Watch: Why are gas prices rising?

Four in five (80%) consumers have attempted to cut down their energy use at home amid rising prices, with two-fifths (39%) turning down the thermostat, a third (33%) only using the heating on days it felt particularly cold, and 15% turning off their heating entirely.

Uswitch.com is now advising consumers to report meter readings every month to ensure bills stay accurate, as well as providing a guide on free energy saving tips.

“Higher prices over the winter has meant we are seeing many more people in energy debt at a time when they should be building up their credit again. This means that households across the country are likely to see their direct debits rise so they can begin to pay back what is owed, making it tough to prepare for future increases,” Justina Miltienyte, energy policy expert at Uswitch.com, said.

“If you do not have a smart meter, record your meter readings regularly and submit them to your supplier so your bills are as accurate as possible. If you are in credit, it’s probably best to leave the money with your supplier to act as a buffer in the autumn and winter.

“If you are behind on your bill payments, or your energy account is going into debt, speak to your provider as soon as possible as they may be able to help you find a solution.”

Read more: UK consumer confidence continues to fall as cost-of-living crisis deepens

It comes as the Office for National Statistics revealed that more than £1.4bn is spent on electricity, gas and oil by health, education, defence, prison and probation services, and police annually.

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “Things are set to go from bad to worse with the energy price set to rise again in October. The escalating European energy crisis resulting from Russia’s devastating invasion of Ukraine could send prices spiralling across the continent.

“While the UK is not significantly dependent on Russian gas, we are tied to international gas markets that are all impacted by a drop in global supply. As such, Russia’s decision to cut Poland and Bulgaria off from its gas could pile on more pressure on consumers who are already struggling to pay energy bills.”

He added: “Higher energy bills are felt most by the poorest families who allocate the bulk of their spending to meeting these costs, and perilous for those without the cushion of savings to fall back on.

“It’s vital people think about how the rising cost of living could impact their financial wellbeing and consider what protective steps are necessary to take now to avoid money worries later.”

Watch: How to prevent getting into debt

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting