Consumers in debt to energy suppliers by £478 million

Almost 4 million UK households (14%) are in debt to their energy supplier, according to new research from uSwitch.com, the independent price comparison and switching service. The annual study shows that indebted consumers now owe £131 on average - 4% more than last year - and have collectively racked up an estimated £478 million of debt to energy companies.

2011 was a year of successive price hikes and this is reflected in energy debt levels. Over a third of those in debt (35%) owe more than they did a year ago, while just 13% owe less. The average amount owed to suppliers has risen to £131, up from £126 last year. But more tellingly, the average amount owed today is 15% higher than in 2008, reflecting the punishing 53% or £433 hike in the cost of energy seen since then.

Despite their indebtedness, nearly a quarter (24%) of those affected may be burying their heads in the sand as they hope that their debt will go down naturally over time. One in five households in debt or arrears (21%) intend to pay it off through a lump sum, while over four in ten (41%) plan to increase their direct debit.

Worry over mounting debt is leading almost one in ten (9%) to agree a repayment plan with their supplier, while 3% expect to go so far as to move onto a prepayment meter. This is 1% higher than last year and is a cause for concern as prepayment meters are a more expensive way to pay for energy.

And while suppliers have recently moved to cut their prices again, by £41 or 3.2%, this still leaves the average household energy bill £183 or 17% higher than just over a year ago. As a result, energy debt is expected to increase again.

Ann Robinson, Director of Consumer Policy at uSwitch.com, says: "With households still struggling to absorb last year's price hikes, energy debt is on the rise again. And although suppliers have cut their prices this year, the average reduction of £41 or 3.2% doesn't come near the average increase of £224 or 21% seen since the end of 2010 - as a result consumers will continue to struggle to pay their bills and debt will continue to grow.

"Those in energy debt can face a catch-22. Despite knowing they could reduce their bills by moving to a cheaper energy plan, consumers can see debt as a barrier to switching. However, our research shows that while the average debt is £131, consumers could save up to £420 just by switching. So while they may have to pay any outstanding debt to switch, by cutting the cost of their energy they could avoid falling back in to debt in the future.

"The important thing is to keep a lid on energy costs - make sure you are paying the lowest possible price for your energy and cut down on the amount of energy you use. Paying energy bills by direct debit will help to cut the cost as suppliers offer valuable discounts for paying this way. Consumers should also make sure that they or their supplier are taking regular meter readings as relying on estimated bills can be a shortcut to debt. Anyone who is concerned about managing their energy bills should contact their supplier to discuss the options."