Key facts
- Households in Great Britain could owe energy suppliers up to £7bn by the end of the year.
- Domestic energy debt reached a record £6bn at the end of June.
- The energy price cap is expected to increase by 4% from October.
- Cornwall Insight forecasts typical annual household bills could reach £1,729.
- Rising global wholesale gas costs are a primary driver of expected price increases.
Households in Great Britain are facing a potential increase in energy debt to £7bn by the end of the year, according to an industry group warning. This projection comes as domestic energy debt and arrears have already climbed to a record £6bn by the end of June, fueled by rising gas prices exacerbated by the Middle East conflict.
Energy UK, the trade association, anticipates that the debt will accelerate due to an expected increase in the government's energy price cap. The regulator is reportedly set to confirm a 4% rise in the price cap from October, which will impact millions of households. Dhara Vyas, chief executive of Energy UK, highlighted that many households are struggling with high energy bills and urged the government to consider more permanent solutions like a social discount tariff instead of temporary measures.
Forecasters at Cornwall Insight predict that the rising price cap could lead to typical annual household gas and electricity bills reaching £1,729. They expect electricity rates to increase slightly to 26.57p per kilowatt hour and gas charges to 7.90p per kilowatt hour for direct debit customers. The actual cost for households will depend on their consumption, with current average bills calculated on lower energy usage due to high costs forcing conservation.
Energy UK attributes the anticipated rise in energy costs primarily to the increasing expense of sourcing gas from the global wholesale market, with the cost of upgrading Great Britain's energy networks also playing a role. The group's debt estimates are approximately £1bn higher than Ofgem's official figures, which only count bills overdue by 90 days. Ofgem's methodology, while using lower public figures, spreads the cost of unpaid bills across all consumers, adding about £50 annually to typical bills.