6.8 million households in debt to energy suppliers

New research from uSwitch.com, the independent price comparison and switching service, reveals that 6.8 million households (26%) are ‘in the red' to energy suppliers. The average debt is £114 - enough to prevent consumers from being able to switch suppliers. However, many more could fall into energy debt following recent price increases, as suppliers have to wait for their next account review before increasing customers' direct debits and consumers are not taking action themselves.

Energy prices have gone up by around £136 per household since the beginning of the year - the average household energy bill now stands at £1,048. However, suppliers cannot automatically increase direct debits until they have reviewed the account - this is to ensure that customers are paying the correct amount and to avoid putting up people's monthly payments unnecessarily. Unfortunately though, it could leave many households underpaying until their account is reviewed.

With almost three quarters (74%) of households paying their energy bills by direct debit, the concern is that many of these could be tipped into arrears. Consumers are not helping the situation either. Even though suppliers have written to advise customers of the price increases and to say that they will not be making any immediate changes to direct debits, only 13% of direct debit customers are going to take action by asking their supplier to increase their monthly payments now.

This could, in part, be because of lack of information. Less than a third (29%) say that their supplier has given them an estimate or guide on how much they can expect their bills to go up by following the price increase. Worryingly, consumers seem to be unaware that they could be storing up future debt problems, which could leave them stuck with their existing supplier. Before switching providers a household would need to clear any outstanding debt and a provider can refuse to allow a switch if the debt is more than £100.

Of those who are approaching their supplier to increase their direct debits straight away, the average requested increase is £14, which equates to £168 per year. Some are still risking a shortfall though - 40% are increasing their direct debits by up to £10, which only adds up to an additional £120 a year at most. The average monthly dual fuel direct debit at the moment is £70.

According to Ofgem, 2 million energy customers are on a prepayment meter set to recover a debt or on an official debt repayment programme scheduled to last longer than 13 weeks. Ofgem's energy debt statistics only take into account customers who have a specific arrangement with their supplier to repay outstanding arrears - the only direct debit customers included under this definition are those who have specifically joined the scheme to repay a debt.

However, in its ‘Debt and disconnection review' January 2008, Ofgem says that the average level of debt for those on a repayment scheme has been steadily increasing and that CAB has advised that energy debt cases have increased by a third. Today's research suggests millions more households are at risk of unknowingly slipping into the red.

Ann Robinson, Director of Consumer Policy at uSwitch.com, comments: "6.8 million households are in debt to energy suppliers - this issue has to be tackled now before it snowballs further. As well as the misery and uncertainty that debt can cause, owing money to an energy supplier can prevent consumers from being able to reduce household expenditure by moving to a lower cost energy deal. It is a barrier to switching and consumers cannot afford to have this option closed to them in today's economic environment.

"Consumers have to take a more active role in managing energy bills - don't just sit back and wait for your supplier to review your account. If you are near or already in the red and can afford to increase your payments, contact your supplier. Make sure you are paying the lowest possible price for your energy by shopping around, become more energy efficient and don't get caught out by inaccurate billing - make sure you or your supplier is taking regular meter readings. Simply relying on estimated bills after a price rise could be a shortcut to debt.

"Getting bills right becomes even more critical at a time of rising prices as there is a greater chance of customers being pushed into debt. I would urge suppliers to make debt avoidance a priority - give consumers an idea of how much more they could potentially be paying, warn them of the dangers of underpaying and advise those who are near or already in the red to get in contact immediately about increasing their monthly payments."

Customers wishing to increase or discuss their direct debits should contact their supplier on:

British Gas: 0845 955 5200
EDF Energy: 0800 096 2270
E.ON: 0845 052 0000
npower: 0845 672 0073
Scottish and Southern Energy: 0800 0525252 (SWALEC) or 08457 444555 (Southern Electric and Scottish Hydro Electric)
ScottishPower: 0845 2 700 700.