Personal Finance

Fury as energy bills will rise by £28 to stop firms going bust

Energy customers must pay an extra £28 charge to stop suppliers going bust.

The price rise came into force on April 1 to address the mounting debts from customers which now total a record £3.1 billion.

Ofgem launched a consultation to bring in the one-off charge in December.

But charging customers more when many are already struggling to afford current gas and electricity prices was "crushing vulnerable households", critics said.

Industry experts say energy debt is "the highest level we have seen".

The £28 charge works out at £2.33 a month. It is being added to the bills of customers who pay by direct debit or standard credit and is partly offset by the termination of an allowance worth £11 per year that covered debt costs related to the Covid pandemic, Ofgem said.

Prepayment customers are not affected as they do not build up the same level of debt because they pay as they go.

Citizens Advice said it was helping more people who can't afford their energy than ever before and more households were running up debt even during the warmer summer months.

Speaking as the consultation was launched, chief executive Dame Clare Moriarty said: "High energy prices mean millions of people remain at risk of falling behind in the coming months. An increase in the price cap to pay for higher debts will make people's bills even more unaffordable. Any change must be in the best interest of all consumers."

Dame Clare joined fuel poverty charity National Energy Action in calling for more support from the Government.

Its chief executive Adam Scorer said: "The enormous weight of household energy debt is crushing vulnerable households. Government cannot just look the other way and hope for the best.

"This is the highest level of energy debt we have seen, it is growing quickly and concentrated in the poorest households. Energy bills are now on average £800 per year higher than they were at the start of the energy crisis.

"While industry and regulator-led support is welcome, Government must put in place additional targeted support and establish a Help to Repay scheme and an enduring social tariff."

'More pain if firms go bust'

Ofgem, the energy regulator, said bills could rise further if it did not take action and suppliers collapsed.

NimbleFins previously reported how last year about 10% of the energy price cap was funding 28 firms who had gone bust.

Announcing the extra fee, Jonathan Brearley, CEO of Ofgem, said: “We also need to address the risk posed by stubbornly high levels of debt in the system, so we must introduce a temporary payment to help prevent an unsustainable situation leading to higher bills in the future. We'llbe stepping back to look at issues surrounding debt and affordability across market for struggling consumers, which we'll be announcing soon.

“These steps highlight the limitations of the current system – we can only move costs around – so we welcome news that the Government is opening the conversation on the future of price regulation, seeking views on how standard energy deals can be made more flexible so customers pay less if using electricity when prices are lower.

“But longer term we need to think about what more can be done for those who simply cannot afford to pay their energy bills even as prices fall. As we return to something closer to normality we have an opportunity to reset and reframe the energy market to make sure it’s ready to protect customers if prices rise again.”

Debt has risen due to rising wholesale prices alongside customers not being able to afford their bills.

But Simon Francis of the End Fuel Poverty Coalition said the Government needs to introduce a 'help to repay' scheme to "get Britain's households back on an even keel".

He added: “Households are struggling under the huge weight of energy debt – which has been caused through no fault of their own, but by record energy bills.

“All this time, energy firms have continued to profit from the misery of people racking up debt and living in cold damp homes."

What do you think? Add your thoughts in the comments section below.

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Helen Barnett

Helen is a journalist, editor and copywriter with 15 years' experience writing across print and digital publications. She previously edited the Daily Express website and has won awards as a reporter. Read more here.


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