Energy debt among British households is projected to reach £7bn by the end of the year, climbing from a record £6bn at the end of June, according to Energy UK, the trade association representing suppliers. The increase reflects expectations that the government’s energy price cap will rise to its highest level in three years when the new rates take effect in October.
The regulator is anticipated to confirm a 4% increase to the price cap later this week. Energy UK’s chief executive stated that millions of households continue to face strain from elevated energy bills. Under the forecast price cap, the typical household would face annual gas and electricity costs equivalent to £1,729 over the final quarter of the year. Energy consultancy Cornwall Insight projects electricity rates rising from 26.11p to 26.57p per kilowatt hour and gas charges increasing from 7.33p to 7.90p for customers paying via direct debit, though individual household bills depend on consumption levels.
The anticipated increase in the price cap is expected to overshadow the impact of the government’s recent VAT reduction on household electricity bills beginning in October, which aimed to provide relief averaging approximately £45 annually. Energy UK’s leadership has called for the government to implement a “targeted and more permanent” solution to rising energy costs, including a social discount tariff, rather than relying on temporary measures.
Rising costs for sourcing gas from global wholesale markets represent the primary driver of the expected price cap increase, with expenses for upgrading Great Britain’s energy infrastructure also contributing more significantly to overall energy costs. Energy UK’s debt estimates exceed official figures reported by the regulator by approximately £1bn, as the trade group counts unpaid bills after 30 days while regulators typically count them after 90 days. The cost of unpaid energy debt is distributed across all consumers, currently adding roughly £50 annually to typical bills.
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