4m households in debt to energy suppliers

2 May 2014

Almost four million households are currently in debt to their energy supplier to the tune of £128 on average, new research has revealed.

Following winter's energy price rises, the average debt per household has risen by £5 to £128, despite the mild weather, according to uSwitch.

The average household bill is now £1,265 a year - £53 more than in 2013 and £793 higher than in 2004. A third of those in debt say they owe more now than a year ago - only 9% owe less.

Worryingly, a quarter of households are choosing to ignore their debt in the hope that their debt will go down in time.

One in five households in arrears intend to pay it off with a lump sum, while more than four in 10 plan to increase their direct debit to their energy supplier. To reduce the debt, almost one in 10 aims to arrange a repayment plan with their energy company.

Ann Robinson, director of consumer policy at uSwitch.com, said: "Those in energy debt can face a catch 22. Despite knowing they could reduce their bills by moving to a cheaper energy plan, many see debt as a barrier to switching. With a difference of more than £300 between the cheapest and most expensive tariff on the market, consumers cannot afford to have this avenue closed to them. This is why it's so important to provide regular meter readings to suppliers as relying on estimated bills can be a shortcut to debt.

"I would also urge those who haven't yet done so to start paying energy bills by direct debit. This spreads the cost evenly throughout the year so that you can avoid the burden of heavier bills in the winter. You will also earn a valuable direct debit discount. However, anyone who has got to the stage where they are concerned about their ability to pay should contact their supplier sooner rather than later to discuss their options."

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Green Deal changes

Meanwhile, the government has increased the amount of money homeowners can get back from improving the energy efficiency of their home through the Green Deal.

From June, households can receive up to £7,600 back through a new Green Deal Home Improvement Fund, which aims to encourage a bundling of measures.

Under the Green Deal, householders can get an upfront loan over a maximum of 25 years from their chosen scheme provider for energy improvements such as new heating systems, solid wall insulation and draught proofing. They will then repay the loan through higher electricity bills while they live there.

Under the new incentive scheme, which is available from June, domestic energy customers can get:

  • up to £1,000 for installing two measures from an approved list; and/or
  • up to £6,000 for installing solid wall insulation; and
  • up to £100 refunded for their Green Deal Assessment

This compares favourably with the initial phase of the scheme, where there was a cap of £1,000 on energy measures and a second phase of the scheme in March 2014, which included up to £4,000 for solid wall insulation, up to £1,000 for room in roof insulation and up to £650 for double glazing.

The interest rate for finance packages available under the Green Deal is fixed at 6.96%.

The scheme also now entitles those who have brought a property in the 12 months prior to application to qualify for up to an additional £500 if they carry out energy-efficiency improvements.

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