More than five million UK households, or 20%, are in debt to their energy supplier, new research from uSwitch shows. This is a 6% increase over last year, when 14% reported being in arrears to their energy provider.
Collectively, the amount owed is estimated at £637m, a staggering £159m increase over last year.
This news comes as the average annual energy bill shows a £100 increase to £1,353, pushing household budgets to the breaking point.
“The soaring number of households in debt to energy suppliers is a clear indication of the pressure people are coming under just to meet the cost of their basic bills,” stated Ann Robinson, Director of Consumer Policy at uSwitch. “The fact that a million more households have fallen behind in the last year — so that over five million are now in debt to suppliers — tells us everything we need to know about the impact of sky-high energy prices.”
Coping with energy debt
22% of those in debt are simply ignoring the the amount they owe, the research also found, hoping that their debt will naturally decline over time. But instead of ignoring the issue, Robinson says there are more proactive measures that can be taken:
“The important thing for households is to try to keep a lid on energy costs. There are two simple ways to do this — use less energy by making our homes more energy efficient perhaps by taking advantage of the Green Deal, and paying less for the energy we do use by switching to the most competitive tariff for our needs.”
Those worried about their debt and who have moved to a prepayment meter (2%) should be aware that prepayment meters are more costly, Robinson warned.
45% of those in debt plan to increase their monthly direct debit payment, while another 22% stated plans to pay off the full amount in one payment.
A drop in average debt amount
The research showed that while 41% owed more than they did last year, the average amount owed is slightly less — £123, or £8 less than the year previous. This is due to price cuts that came early in 2012. However, cuts were soon followed by energy price increases and one of the coldest March months on record, so households will likely see that average debt amount go right back up.
Robinson suggested paying by direct debit whenever possible, for two reasons:
“Paying energy bills by direct debit will also help cut the cost as suppliers offer valuable discounts for paying this way. It also spreads the cost of energy use evenly throughout the year, so that households can avoid the burden of heavy winter bills.