Many households are struggling with overdue payments to their energy suppliers as they face an upcoming increase in energy prices for July. According to recent data from debt advice service Money Wellness, the total amount owed to energy providers has surged by 23% in the last three years. The average arrears have climbed from £1,848 in 2023/24 to £2,270 presently, with nearly half of people seeking debt advice falling behind on their energy bills.
The impending announcement by regulatory body Ofgem on the new price cap for households starting July 1 is causing concern. Industry analysts at Cornwall Insight predict that Ofgem’s new cap could see a rise of over £200 per year, from the current £1,641 to £1,850 annually. Despite this, many households are still struggling to recover financially from previous price shocks, especially from the challenges brought on by the Covid-19 pandemic and ensuing cost-of-living difficulties.
Rebecca Lamb, head of external relations at Money Wellness, highlighted the ongoing burden of energy debt on households, emphasizing that while energy prices have slightly decreased, the debt remains a significant issue. Lamb expressed concerns that even a modest increase in the price cap could push some households further into financial hardship, particularly those already grappling with outstanding debt.
Money Wellness is advocating for the establishment of a national social tariff for energy, similar to existing water schemes, to simplify support for households. The organization estimates that up to 87% of customers in energy arrears could qualify for a social tariff based on criteria like means-tested benefits, disability benefits, evidence of problem debt, or high essential energy use.
The expected rise in the energy price cap is prompting calls for targeted government assistance. Cat Hobbs, director at We Own It, proposed the creation of a publicly owned energy retailer to offer a cost-effective option for households. Hobbs suggested that reinvesting profits from a publicly owned supplier into reducing bills could help alleviate the financial strain on families, especially amid soaring energy costs and increasing profits in the energy sector.
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