Household debt for electricity has hit an all-time high of £1.3 billion – almost three times the amount in September, new figures show.
Six million households are already more than £200 behind on their electricity bills since Ofgem’s price cap was raised last April, research by Uswitch has claimed.
Another 8 million ratepayers also report having no credit balances, meaning a total of 14 million households are likely to have little protection against financial hardship this winter.
Energy debt is currently the most common form of debt and with six million households owing their energy company more than £200, the future looks bleak as the cost continues to rise
Following this, debt charities also called for more support from the government Energy debt has become the most common type of debt for difficult households.
Despite growing anxiety about skyrocketing electricity bills, only 6 percent of ratepayers are considering turning to their suppliers for help.
Two in three Britons do not trust their electricity suppliers, believing they will “rip them off”, and two in five believe suppliers simply make up the numbers on their bills, research by Sagacity has revealed.
Typically, households store energy in the summer months, which helps protect them from rising energy consumption in the winter.
But as household energy debt mounts, there is growing concern about how struggling households will be able to manage their debt and pay for basic utilities.
Ofgem energy price cap has already risen from an average of £1,277 to £1,971 in April last year and is forecast to hit new highs of £3,582 from October and £4,266 from January.
This has led to people trying to ‘cheat the system’ – with almost one in ten reportedly considering entering a false meter reading to reduce their bill.
Social media companies are growing almost as fast, with Don’t Pay UK boasts almost 100,000 pledges before their mass strike.
Some suggest that households experiencing energy problems should only pay for what they can afford urging customers to reduce their direct debits in the coming months and not to build up credit with their supplier.
However, it could be disastrous for families if bills rise from October.
This is Money editor Simon Lambert says the backlash against rising energy prices is quickly gaining momentum, but is urging people to think about how energy direct debits work before discounting them.
He said: “It’s worth noting that your direct debit is spread over the year so you’re overpaying in the summer to help out in the winter and I’d be very careful if you believe everything you read on social media.”
Consequences for those who want to opt out of paying for energy with companies like Don’t pay are potentially serious, and experts warn that energy companies can and will cut off power to those who do not pay for the energy they use.
|April 2022: 1,971 lbs||October 2022: £3,582||January 2023: 4,266 lbs|
|1000 pounds sterling||1820 pounds||2160 pounds|
|1500 pounds||2730 pounds||3240 pounds|
|2000 pounds||3640 pounds||4320 pounds|
|2500 pounds||4550 lbs||5400 lbs|
|3500 pounds||6370 pounds||£7,560|
|Source: This is moneybased on Cornwall Insight energy price cap forecasts for 8 September 2022|
Other users online have also suggested that if customers complain about their energy supplier, they can’t start debt collection proceedings or turn off your electricity if you don’t pay your bills.
TikTok users have suggested that not paying your electricity bill is fine if you do it right, but lead lawyer Paul Britton said it was a “disaster waiting to happen”.
He said: “Encouraging people to stop paying their bills and then registering complaints is a disaster waiting to happen and is likely to just ‘kick the can down the drain.’
“While this may prevent the immediate problem of an outage, it does not stop the arrears from piling up and the energy supplier taking legal action against those who refuse or cannot pay.”
Tara Flynn, of comparison website Choose Wisely, added: “While it sounds like a nice hack, making a complaint to your supplier won’t stop your debt from piling up.
“The longer you go without paying your bills, the worse your debts will get and the more you risk serious consequences.
“Most suppliers aim to resolve complaints within eight weeks, but the energy crisis is not going away anytime soon.
“We’re likely going to be paying higher electricity bills in the new year, so all we can complain about is put the problem on hold.”
“The consequences of not paying your energy bills are far-reaching and can damage your credit rating and reduce your chances of accessing credit in the future, for example to buy a home.”
Despite growing concern over skyrocketing electricity bills, only 6 per cent of ratepayers have considered turning to their suppliers for help, as two in three believe energy firms are trying to rip them off
Imran Hussain, Director of Harmony Financial Services, said: “Anyone who is thinking of paying off their utility bills and thinking they will be able to buy a home within the next few years can forget about it, especially if they have a small deposit.
“Non-payment of electricity bills will be a drag on your credit score.
“As the economic climate worsens, any gaps in credit files will affect who will actually lend to you, and it’s also a slippery slope as it only takes a few missed payments to default or CCJ.”
Doug Miller, director of independent mortgage broker Lansdown Financial Services, added: “While I understand and fully support the need to take a stand against skyrocketing energy prices, ‘No Pay in the UK’ must be stopped immediately.
“Destroying your credit profile should be a last resort. Even one missed payment affects your ability to get a mortgage.
“The trade-off here is a potential saving of up to £100 a month on the average household’s electricity bill, but your mortgage payments soar by hundreds of pounds a month because your credit rating has plummeted.
“How can this be considered good? Banks don’t care that you’re “sponsored”.
“If you miss one or more payments, you could potentially end up paying higher interest not only on new credit cards, loans and car financing, but also on your biggest debt in life, your mortgage.
“Education is vital and Don’t Pay UK has absolutely no warning of the consequences of what they are asking millions of UK households to do. It’s terrible.”
Britton added: “When it comes to the Christmas period, when people are often struggling for cash, rising electricity bills can be out of control and constant threats of legal action from utility providers can dampen the festive spirit.
Destroying your credit profile should be a last resort. Even one missed payment affects your ability to get a mortgage.
Doug Miller, Director, Lansdown Financial Services
“Consumers should fully understand the consequences of not paying their bill in full before engaging with any of the companies on offer.
“The advice is if you can afford to pay then you should avoid the stress and legal action from the utility providers.
Justina Miltieniete, head of policy at Uswitch, said: “Energy debt has hit an all-time high at the worst possible time, turning this winter’s energy price hikes into a very dangerous situation for many households.
“This shows that the cost of living crisis is already putting a sharp squeeze on budgets, even in the summer months when families are struggling with rising bills across the board.
“If you are behind on your bill payments or your electricity bill is in arrears, contact your supplier as soon as possible.
“They should be able to help you find a solution, such as working out a more affordable payment plan. You may also find that you qualify for additional support such as hardship funds and other energy assistance schemes.
‘The government should also take energy debt seriously ahead of winter – and a bigger support package for vulnerable households must be agreed as a priority.”
Ten tips for energy saving
The Energy Saving Trust has listed these ten tips and how much they could save the average household on energy and water costs per year. Read more at energy saving tips here.
1. Turn appliances off standby: £55
2. Fire-proof slits: £45
3. Turn off the lights: £20
4. Wash at 30 degrees and reduce use to once a week: 28 lbs
5. Avoid using the tumble dryer: £60
6. Limit your shower to four minutes: £70
7. Swap one bath a week for a shower: £12
8. Don’t overfill the kettle and install an aerator tap: £36
9. Cut your dishwasher use to one run a week: £14
10. Insulate your hot water cylinder: £35
Source: Energy Saving Trust, based on a typical three-bedroom gas-heated house in the UK, using marginal prices for April 2022.
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