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Energy debt at record levels – even before price hikes kick in

Written by: Emma Lunn
Households owe a record £1.3bn to energy suppliers, with worse to come when more price hikes take effect and people switch their heating on for winter.

According to Uswitch, energy debt in the UK is already three times higher than it was a year ago, with many households worried about being forced to switch to a prepayment meter if they fall behind on payments.

Calculations by the price comparison website found that six million households owe an average of £206 to providers. This is 10% more than they owed in April and at a time of year when people will have usually built up credit to cope with winter bills.

The number of homes in credit with their energy supplier has dropped from 11 million to nine million since April. Eight million households have no credit balance at all, leaving them with no protection from hardship in the coming months.

Ofgem will announce the new level of the price cap on 26 August. This is predicted to rise from £1,971 to £3,358 and result in energy bills rocketing this winter. Worse is set to come in January – analysts at Cornwall Insight predict the price cap will be increased to more than £4,200.

Uswitch found that almost a fifth (18%) of billpayers are worried about their supplier forcing them onto a prepayment meter this winter due to their debt. Nearly two in five (38%) consumers didn’t know this was something their provider could do.

Prepayment meters need to be topped up with a card or tokens, and generally cost more than post-pay meters.

Justina Miltienyte, head of policy at Uswitch, said: “Energy debt has hit an all-time high with the worst possible timing, turning this winter’s energy price hike into a deeply precarious situation for many households.

“Our data shows that while a similar proportion of people are in debt as in April – people now owe approximately 10% more than just four months ago to their energy suppliers. This is an alarming situation, as summer is traditionally a time when households are using less power for heating, which helps bill payers to build up energy credit ahead of the 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. They should be able to help you find a solution, such as working out a more affordable payment plan. You may also find you are eligible for additional support such as hardship funds and other energy help schemes.”

The figures about energy debt come after warnings that the UK could see blackouts this winter. Energy bosses have today been summoned by government ministers to explain why they have been reporting bumper profits while households face crippling bills.

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