Latest figures from Energy UK show that domestic customer energy debt is likely to have hit a record £6 billion in the first half of this year and remains on course to reach £7 billion by the end of 2026, with the October price cap at a three-year high.
Energy UK had already warned about the growing debt problem earlier this year in Energy debt: Everyone pays, which found that the figure had doubled in three years and would keep rising without coordinated intervention across government and industry. The latest data show that more than three million customers are now in debt or arrears, with the average amount owed around £1,800.
The trade body is renewing its call for action both to relieve the worst-affected customers who have little prospect of paying off arrears, and to tackle the causes of debt. Central to that is a social discount, as Energy UK set out in a report earlier the same week — using income, health and energy consumption data so customers get the right help, with flexibility for different levels of need and changing prices.
Other measures should include greater use of smart pay-as-you-go meters and new regulations when people move into new properties, both of which can help stop debt building up in the first place. Energy UK also says Ofgem needs to make progress with its long-delayed debt relief scheme.
Earlier this year the industry body said that, because bad debt is recovered from all energy bills, it was adding an extra £50 a year to typical dual-fuel customers under the price cap, while standard credit customers pay around £140 because of the debt allowance built into tariffs. If total debt reaches £7 billion, that could add a further £10–£15 to bills.
Arrears now represent around 75% of all unpaid energy bills, meaning there are no repayment plans in place for the majority of this debt. More than one million households currently have no registered details with suppliers, further increasing the risk of unmanaged debt.
The cost of bad debt is also difficult to cover for energy suppliers, who Energy UK says made a projected £5.31 profit per customer in 2025, threatening their financial stability and their ability to invest in better services and helping customers lower bills.
Energy UK’s Chief Executive, Dhara Vyas, said:
“We made a stark warning about customer debt earlier this year and voiced fears that without urgent action, what was already a crisis would deteriorate further.”
“Unfortunately, those warnings are proving all too accurate — the debt mountain is climbing higher, causing immense worry to many customers, adding growing costs to everyone’s bills and threatening suppliers’ financial viability.”
“Persistently high energy bills over the last few years have meant many households have accumulated debt that they have little chance of paying off — given that affording their latest bill will be challenging enough.”
“Ofgem’s proposed debt relief scheme recognises the need for intervention with such customers but it’s over two years since it was first proposed and risks being too little, too late.”
“It is just as important to tackle the causes of debt by supporting households in need with a social discount scheme — as we outlined earlier this week. Other measures like greater use of smart pay-as-you-go and new regulations around new homeowners and tenants would also prevent customers from building up debt.”
“The industry has been raising the alarm about debt for some time now and if these warnings continue to be ignored, then nobody should be surprised by the consequences.”
Energy UK’s figures differ from Ofgem’s official ones by measuring debt and arrears unpaid after 30 days. As this is the metric used for the bad debt allowance in the price cap — that which is unlikely to be recovered — the industry believes it is a more accurate representation of the problem. Ofgem later confirmed that the household energy price cap would rise by 4% from 1 October.
Read the Energy UK statement: Energy debt hits £6 billion.
Dhara Vyas is Chief Executive of Energy UK, the trade association for the energy industry.
