The coldest winter for 30 years and a lack of significant price cuts have sent UK households deeper into debt with energy suppliers, according to new research from
uSwitch.com, the independent price comparison and switching service.
Despite a dip in the number of households in the red to suppliers, the average debt has increased. As a result consumers now owe an estimated £728 million on their
energy bills.
The study shows that 5.5 million households (21 per cent) are now in debt to energy suppliers compared with 6.5 million (25 per cent) last year. However, the average amount owed today is £132, five per cent higher than last year - when the average debt was £126 - and 16 per cent higher than 2008 when households owed £114 on average.
Four in ten (41 per cent) of those in debt to their energy supplier owe more than they did this time last year, while 17 per cent report that they now owe less. This suggests that many households are still struggling to get to grips with the 42 per cent or £381 hike in prices in 2008 and haven't felt much benefit from the 4 per cent or £54 drop in prices seen last year.
A quarter of households in debt (25 per cent) intend to pay it off by lump sum, while four in ten (40 per cent) plan to increase their direct debit. However, 8 per cent are considering agreeing a repayment plan with their supplier and 5 per cent are thinking of moving onto a prepayment meter (PPM), a 3 per cent increase on last year.
Worryingly, says uSwitch.com, this indicates that consumers are indeed starting to view PPMs as a useful budgeting tool and a way of managing their energy costs, despite the fact that PPMs are a more expensive way of paying for energy than direct debit.
Despite a long run of low wholesale prices, just three of the big six suppliers -
British Gas, Scottish and Southern Energy and
E.ON - have dropped prices this year. The average household energy bill today is £1,219 - £307 or 25 per cent higher than at the beginning of 2008.
This significant increase coupled with the impact of the recession and the cold winter will have played a role in pushing up energy debt, adding even greater weight to calls for suppliers to cut their prices.
"The impact of the 42 per cent or £381 hike in energy prices in 2008 cannot be underestimated,” said Ann Robinson, director of consumer policy at
uSwitch.com.
“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 25 per cent higher than at the beginning of 2008 again raising serious concerns about the affordability of energy in this country.
"The increase in energy debt this year is symptomatic of the fact that we are entering an era of high cost energy. Households will have to adapt if they are to protect themselves from spiralling energy bills."
Save money on insurance by receiving our MoneyMaker newsletter. You could save hundreds each year. http://www.everyinvestor.co.uk/register-stage-1
