Consumer gas and electricity debts hit boiling point at £728 million
Filed under: House and Home, Budgeting & Planning
About 5.5 million households in Britain today are in debt to their energy suppliers, with the average amount owed standing at £132, according to new research from price comparison site uSwitch.That is a 5% increase on the typical debt this time last year and means that collectively we now owe utility companies an incredible £728 million.
Even more worryingly, this amount is unlikely to fall soon, as consumers struggle with the cost of the cold snap, and the fact that energy prices have rocketed over recent years.
The high level of energy prices is one of the main reasons household debts to energy suppliers have risen - by 5% since last year when the average amount owed was £126 and by 16% since 2008 when a typical consumer owed £114.
Household gas and electricity bills shot up by 42% in 2008 due to an increase in wholesale energy costs to suppliers. But even though these costs have now fallen significantly, energy companies have been slow to pass the cuts on to their customers.
Price reductions brought in last year brought bills down by just 4%, or £54, and those announced this year equal only a 4%, or £45, cut.
What's more, while four energy companies have given details of their plans to cut prices, only British Gas has implemented its plans so far.
And even once the price cuts announced by the other three suppliers - Scottish and Southern Energy, E.ON and npower - come into effect, the average household energy bill will still stand at £1,209 a year, which is £297, or one third, higher than at the beginning of 2008.
Coupled with the extra heating requirements caused by the coldest winter for 30 years, it is not hard to see why many families, already hit by the recession, are struggling to keep up with their energy payments.
Ann Robinson at uSwitch said: "The impact of the 42% hike in energy prices in 2008 cannot be underestimated - consumers are still feeling the pain and subsequent price cuts have done little to ease this. The fact remains that consumers have been left facing bills that are 33% higher than at the beginning of 2008.
"This has clearly taken its toll with the average amount owed on energy bills increasing by 16% since 2008, yet again raising serious concerns about the affordability of energy in this country."
One small ray of light in the findings of the survey is that the number of households with energy debts has in fact fallen since this time in 2009, when 6.5 million homes owed money to their gas and electricity suppliers.
However, the situation is still looking pretty bleak as the average debt has climbed by 5% since 2009 and by 16% over the last two years.
Many of those with energy debts may also feel trapped on an uncompetitive deal because they cannot switch to a new gas or electricity supplier until they have repaid the amount they owe to their current energy company.
However, if you can find a better deal elsewhere, it is worth attempting to switch even if you cannot pay the debt off first as regulator Ofgem has put systems into place to minimise the number of switches blocked due to debt.
Other tips for reducing energy debt and lowering the amount you spend on gas and electricity include taking regular meter readings to ensure that your estimated bills are accurate and cutting back on the amount of energy you use.
Ways to reduce your energy consumption include using energy-efficient light bulbs and appliances and installing loft or cavity wall insulation. Check out the energysavingtrust website for more ideas on energy efficiency in the home.
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