According to figures published earlier this week, more than five million UK households are in debt to an energy supplier. In total, these households owe an estimated £637 million. This balance is more than six percent higher than it was just last year and the average energy bill has increased to £1,353, a figure that is almost £100 higher than it was in 2012.
Statistics Reveal the Severity
Research conducted by the comparison site uSwitch reveals that 41 percent of UK households owe more to energy firms than they did one year ago. Only one in nine households owes less, putting just nine percent of homes in an enviable position.
Approximately 22 percent of households in debt ignore the situation, many hoping that the balance owed will eventually decrease. However, rising costs for other household necessities are making it difficult for consumers to make any headway with energy balances.
USwitch Director of Consumer Policy Ann Robinson noted that the increasing number of households with energy debt clearly indicates that pressure that many consumers are under to meet the cost of living. Price cuts enacted last year reduced the average amount owed as of February but only by £8. Average energy debt may soon increase due to rising winter prices and the record low temperatures experienced during March.
During the past five years, energy prices have increased by approximately two-thirds. A series of increases took place during the past six months, causing household energy bills to climb. Making things worse, one of the largest energy companies in England, SSE, was recently fined £10.5 million by regulator Ofgem due to “prolonged and extensive” misselling. This represents the largest penalty ever imposed for an energy supplier within the country.
How Energy Suppliers Are Handling the Debt
Suppliers of energy are suffering due to the huge past-due balance but there is not much they can do. An energy firm is no longer permitted to cut off the supply of energy to people whose payments are in arrears. However, the firm can try to persuade debt-saddled customers to change to pre-payment meters. This will ensure that providers receive their money but it will cost households more in the end. Only about two percent of customers end up switching to these meters.
Steps That Consumers Are Taking
Nearly four-fifths of households are taking responsibility for their energy debts in different ways. Approximately one-fifth plan to use a lump sum to repay their balances. An estimated 45 percent will be increasing direct debit payments, taking advantage of the discounts provided by this payment method.
Experts recommend taking regular meter readings in order to prevent relying on estimated bills that can make debt accrue more quickly.
Consumers can also reduce energy costs by improving the energy efficiency of their homes. Government financing is available through programs such as Green Deal, which eliminates the initial cost of improvements by offering a loan that is repaid over time through the electricity bill.
Reduced energy use should offset the extra charges on the bill so consumers will not pay more overall. Participating in Green Deal does not prevent the consumer from shopping around for energy suppliers. The current supplier will inform the new supplier that the household participates in Green Deal and bills will be issued in accordance with the new tariff.
Consumers should take steps to reduce their energy debts now because it will not be long before cold weather arrives again. By eliminating their balances during spring or summer, they will be able to afford the higher energy bills of fall and winter.
Heat and lighting are necessary for survival, making it important to plan for these expenses.