Almost 5 million UK households (19%) are in debt to their energy suppliers to the tune of £624 million, according to new research from uSwitch.com.
After two years of price cuts, the average amount owed to suppliers has fallen by 4.5% from last year (£132) to £126 today. But this is still 10.5% higher than in 2008 when the average debt was just £114. Worryingly, now that suppliers have increased their prices again by an average of 5.9% or £63, taking the typical household energy bill to £1,132 a year, energy debt is likely to rise again. The fact that bills today are 38% or £313 higher than in 2008 makes this even more certain.
Even though households benefitted from price cuts in 2009 and 2010, nearly four in ten (38%) say they're more in debt today compared to last year and just 14% say they owe less than last year.
Nearly a quarter of households in debt or arrears (23%) intend to pay it off by lump sum, while over four in ten (42%) plan to increase their direct debit. However, nearly a quarter (22%) won’t be doing anything about their debt, hoping it will go down naturally over time.
For some, concern over their debt is getting too much, with one in ten (10%) considering agreeing a repayment plan with their supplier, a 2% increase on last year. However, there is some good news – just 2% of those in debt to suppliers are thinking of moving onto a prepayment meter (PPM), 3% less than last year. This drop is welcome as PPMs are a more expensive way of paying for energy than direct debit.
Ann Robinson, Director of Consumer Policy at uSwitch.com, said: “Energy debt can be a catch-22. Despite knowing they could reduce their bills by moving to a cheaper energy plan, consumers can see debt as a barrier to switching. However, our research shows that while the average debt is £126, consumers could save up to £458 by switching. So while they may have to pay any outstanding debt to switch, by cutting the cost of their energy they could avoid falling back in to debt in the future.”
Find out the different options available for dealing with energy debt and download free energy debt factsheets for more information at uSwitch.com.
Follow our energy saving tips to avoid getting into energy debt and find out how you can reduce your household bills.