Despite last year's price cuts, energy debt soars

Ofgem's latest quarterly social obligations report reveals some worrying trends and raises concerns about the ongoing affordability of household energy, says uSwitch.com.

The report highlights:
A 13% increase in the number of electricity customers entering into new debt repayment arrangements and a 21% increase in those making similar arrangements for gas in Q3 compared with Q2 2009

Average level of debt is 20% higher year on year (Q3 2009 compared with Q3 2008)

An increase in the number of people with debts over £600 - gas saw an 18% increase in Q3 2009 compared with Q2.

While Ofgem points to the impact of the recession, higher energy prices will also have played a role says uSwitch.com. Price decreases last year came to 4% or £54, scarcely scratching the surface of the 42% or £381 increase seen by households the year before. In fact the average household now faces an annual energy bill of £1,239 - £327 or 36% more than at the beginning of 2008. This will have had an impact on the affordability of energy with some households inevitably finding it just one cost too many.

Thomas Lyon, energy expert at uSwitch.com, says: "The recession will have played a part but Ofgem cannot afford to brush the cost of energy under the carpet. Energy bills are substantially higher - £327 a year more - than they were at the beginning of 2008 even after suppliers cut their prices last year. This will have had an impact on the ability of many households to afford and pay for their energy.

"These debt numbers could get worse as we are in the middle of a bitter winter which could add an extra £60 onto our next quarterly bills because of the extra heating and energy we've all had to use. This will hit those who pay by cash or cheque particularly hard and some may see no alternative but to enter into a debt arrangement with their supplier.

"Households can help themselves by moving to direct debit so they can spread the cost of their energy across the year. They should also look to cut the cost of their energy by moving to a cheaper deal and reducing the amount of energy they use. But suppliers could help too. If there is enough in their coffers to cut their prices further we would urge them to do it now so that consumers can feel the benefit this winter when it will make a real difference to their heaviest bills."