Energy bill debt hits £6bn

Latest figures from Energy UK show that domestic customer energy debt is likely to have hit a record £6 billion in the first half of this year and – with the price cap for October expected to be at a three year high which see energy debt reach £7 billion by the end of 2026. 

Energy UK had already warned about the growing debt problem earlier this year in a report, which revealed that the figure had doubled in the last three years and would only increase further without coordinated intervention across Government and industry. The latest data illustrate that over three million customers are now in debt or arrears and the average amount owed is around £1,800.

The trade body is renewing its call for action to both relieve the worst affected customers who have little prospect of paying off arrears – and tackle the causes of debt. Crucial to this is the introduction of a ‘social discount’ as proposed by Energy UK in a report earlier this week – using income, health and energy consumption data to ensure that customers get the right help, with flexibility to reflect differing levels of need and changing prices.

Other measures should include greater use of smart pay-as-you-go meters and new regulations when people move into new properties – both of which can help prevent build-up of debt in the first place. Ofgem also needs to make progress with its long-delayed debt relief scheme.

Earlier this year the industry body revealed that, as bad debt is recovered from all energy bills, it was adding an extra £50 a year to typical dual fuel customers under the price cap, while standard credit customers pay around £140 due to the ‘debt allowance’ built into tariffs. If total debt does reach £7 billion, this could add a further £10-£15 to bills.

It added that arrears now represent around 75% of all unpaid energy bills – meaning there are no repayment plans in place for the majority of this debt, while over one million households currently have no registered details with suppliers, further increasing the risk of unmanaged debt.

The cost of bad debt is also difficult to cover for energy suppliers (who only made a projected £5.31 profit per customer in 2025) threatening their financial stability and undermining their ability to invest in improving services to customers and helping them lower bills.

Energy UK’s Chief Executive, Dhara Vyas, said “We made a stark warning about customer debt earlier this year and voiced fears that without urgent action, what was already a crisis would deteriorate further. 

“Unfortunately, those warnings are proving all too accurate – the debt mountain is climbing higher, causing immense worry to many customers, adding growing costs to everyone’s bills and threatening suppliers’ financial viability.  

“Persistently high energy bills over the last few years have meant many households have accumulated debt that they have little chance of paying off – given that affording their latest bill will be challenging enough.  

“Ofgem’s proposed debt relief scheme recognises the need for intervention with such customers but it’s over two years since it was first proposed and risks being too little, too late.   

“It is just as important to tackle the causes of debt by supporting households in need with a social discount scheme – as we outlined earlier this week. Other measures like greater use of smart pay-as-you-go and new regulations around new homeowners and tenants would also prevent customers from building up debt.

“The industry has been raising the alarm about debt for some time now and if these warnings continue to be ignored, then nobody should be surprised by the consequences.”   

Energy UK’s figures differ from Ofgem’s official ones by measuring debt and arrears unpaid after 30 days. As this is the metric used for the bad debt allowance in the price cap – ie that which is unlikely to be recovered – the industry believes this is a more accurate representation of the problem.