As winter arrives, Britain’s households are experiencing an energy crisis like never before. This worsening environment is pushing debt to all time highs and pushing families to a breaking point where they can no longer afford their bills. New numbers indicate that at least 1.13 million households lack any sort of repayment agreement—like layaway for electricity—during the pandemic. Through the fall of 2022, an estimated 926,000 households had trouble paying their gas bills. With the quarterly energy price cap poised for a staggering rise, prospects are only set to darken.
E.ON’s chief executive, Chris Norbury, outlined the complex dynamics of customers facing these struggles, categorizing them into three distinct groups. The latter group includes people who might otherwise afford to pay their bills but are experiencing bills they can’t afford to pay. The second group might be people who are new to not being able to pay their bills on time. Now, because of the current energy crisis, they can’t afford to pay their bills. The last group is of customers that are wealthy enough that they don’t need to pay their bills.
Of all the European nations, the UK’s approach to energy pricing is the most unusual. It fails to deliver in a critical area: offering targeted price protections for consumers. This is particularly striking given that the quarterly cap on energy charges is going up yet again. This increase will add 2% to the typical annual dual-fuel bill, taking it to £1,755. Ofgem’s most recent data indicates that the rate of billpayers falling into arrears began to level out over the course of last year. The overall burden of energy debt has surged. By June, householders already owe a shocking £4.4 billion to energy suppliers. This represents an annual increase of more than £750 million.
Perhaps most concerning is the increasing rate at which households are falling into arrears. In June it was an estimated 876,000 households paying off electricity arrears and 714,000 households repaying for gas. Lindsey, who lives in Cheshire, is 62 years old. She lives with several overlapping health conditions and dreads the increasing costs that limit her ability to keep her home at a healthy temperature. “I need my home to be warm, but I struggle with the cost of heating,” she stated.
The government’s actions suggest that they understand the need for urgent intervention. They have made calls to extend the warm home discount scheme, worth £150, to help an estimated six million households. Gillian Cooper, director at Citizens Advice, cautioned that while this expansion is a step in the right direction, it remains insufficient: “It is not enough to turn the tide.”
The End Fuel Poverty Coalition has long warned of dangerous effects on human health from a lack of proper heating in colder winter months. As their op-ed cautions, the decision to cut off heat to freezing homes would endanger thousands of lives. Second, letting housing fall below a comfortable temperature increases the strain on the National Health Service. And they are advocating for more targeted support for those families who are low-income. These include alternatives such as a social energy tariff at a reduced rate.
Ofgem is doing a good job of actively controlling the increasing debt. First they have roundly slapped an additional £50 per year on the price cap. This increase is intended to allow energy suppliers to recover new costs due to unpaid debt. An Ofgem spokesperson emphasized the need for households to manage their energy payments responsibly: “We know allowing households to build up unsustainable debt isn’t the right thing to do, and it’s vital that people pay for the energy they use as increasing levels of debt drive up costs for everyone.”
In a separate presentation following the first session, Chris Norbury dug deeper into consumer debt burdens. He noted that E.ON’s debt book illustrates a concerning trend of financial hardship across different demographics: “If you look at our debt book it tells a story: fundamentally, there are three types of customer. Countless others have tragically experienced financial distress. Energy debt is usually an index of the experience of being in poverty.
The choice for energy consumers in Great Britain is becoming more treacherous as we head into winter. An unprecedented one in three households are having difficulty affording their energy bills. At the same time, European counterparts have put in place strong protective measures, leaving millions scratching their heads at how they plan to weather this storm.