Unpaid Energy Bills Have Reached £6bn, and Everyone Else Is Covering It

Energy bills may have been far from most people's minds through a sweltering summer. Washing has dried on the line in minutes; cold showers have been the more appealing option.

The latest forecasts will return the subject to households and ministers with some force. Prices rise by nearly 4% for millions of households in October, and the respected consultancy Cornwall Insight predicts a further 9% increase at the peak of winter in January.

With continuing volatility in wholesale gas driven by events in the Gulf, the industry's position is that high prices are here to stay. EDF suggests bills will remain "stubbornly high" at around current levels at least until the end of the decade.

How far bills have already moved

The typical household dual-fuel bill is now 70% higher than at the start of 2021, before Russia's invasion of Ukraine — around £600 more each year than pre-crisis levels, according to the industry body Energy UK.

Energy prices have been central to the cost-of-living squeeze, and the consequences are now showing up as arrears rather than as complaints.

The typical dual-fuel bill is around £600 a year higher than before the energy crisis, and unpaid debt of more than three months is at a record high.

The debt figures

Unpaid energy debt of more than three months' standing is at a record high, according to Ofgem. Suppliers, who track missed payments of a month or more, estimate total unpaid bills and charges at £6bn, and expect that to reach £7bn by the end of the year.

The average household in debt without a repayment plan now owes more than a typical annual bill — meaning the arrears have passed the point where ordinary budgeting can clear them.

Why this reaches people who pay on time

Here is the part that receives least attention. Debt in the energy system is socialised.

Covering the cost of existing debt already adds about £60 to the average annual bill. The consultancy Baringa estimates everyone could be paying around £100 to cover unpaid debts by the end of the year.

The distribution is regressive. Someone who pays on demand every three months, rather than by monthly direct debit, is typically already paying £150 a year to cover other people's debt, because that payment method carries a higher assessed risk of non-payment. Quarterly billing is more common among lower-income and older households — so the people least able to absorb the surcharge are the ones paying the largest share of it.

What is on the table

Pressure on the government to help those most in need will intensify accordingly.

Ofgem has a proposed debt relief scheme ready, and campaigners have been urging it to proceed while asking ministers to fund implementation. Charities and the industry also want a discounted tariff for those who need it most, targeted using benefits, health and income data.

Energy UK puts the cost of a targeted plan at £1.9bn — far less than the roughly £40bn spent protecting every household during the acute phase of the crisis.

That comparison is the strongest argument available to the campaigners. The state has already demonstrated it will spend on energy bills when the politics demand it. The question is whether it will spend a twentieth as much now, on the specific households whose arrears are currently being paid for by everyone else.