Key facts
- Energy bills are predicted to rise by nearly 4% in October and a further 9% in January.
- High energy prices are expected to persist at current levels until at least the end of the decade.
- Unpaid energy debt has reached a record £6bn, with expectations to rise to £7bn by year-end.
- Covering the cost of existing debt adds approximately £60 to the average annual bill.
- A targeted plan for discounted energy tariffs for vulnerable customers is estimated to cost £1.9bn.
Energy bills are expected to remain high for millions of households, with predictions of a nearly 4% increase in October and a further 9% rise in January. Consultancy Cornwall Insight forecasts that persistently high wholesale gas prices, influenced by global events, will keep energy costs elevated until the end of the decade, according to EDF.
The cost of living crisis has been significantly impacted by rising energy prices, with typical household dual-fuel bills now 70% higher than at the start of 2021. This has led to a record high in unpaid energy debt, estimated by regulator Ofgem to be £6bn and projected to reach £7bn by the end of the year. This debt burden adds approximately £60 to the average annual bill, with consultancy Baringa suggesting this could rise to £100 by year-end.
Campaigners and industry bodies are urging the government to implement a debt relief scheme and introduce discounted tariffs for vulnerable customers, with Energy UK estimating a targeted plan would cost £1.9bn. While many households have reduced their energy consumption, and some have moved to fixed tariffs, others lack the flexibility to cut back. The UK's reliance on gas, coupled with the cost of upgrading the national electricity network and reduced energy storage due to recent heatwaves, contributes to the ongoing price pressure.
In the short term, the government plans to cut VAT on electricity bills in October, but this is expected to be outstripped by a rise in gas prices. Ministers face difficult political choices regarding how to fund support, with options including shifting costs to general taxation or other spending cuts. The upcoming Budget will be closely watched for further measures to address the energy crisis.