Why We Should All Get Used to High Household Energy Bills
Kevin Peachey, Cost of living correspondent
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Energy bills may have been a distant concern through the scorching summer, with clothes drying in minutes on the washing line and cold showers more tempting than hot ones. But recent news and forecasts on gas prices are bringing a renewed sense of worry and urgency to families, as well as government ministers.
Energy Prices on the Rise
Energy prices are set to increase by nearly 4% for millions of households in October. Even more alarming is a prediction from the respected consultancy Cornwall Insight of a further 9% increase at the peak of winter in January. With ongoing volatility in the wholesale gas market, sparked by events in the Gulf region, the energy sector claims that high prices are here to stay. EDF suggests bills will remain "stubbornly high" at their current levels at least until the end of the decade.
The Impact of High Bills
High energy bills have significantly impacted households, contributing to the cost-of-living squeeze. The typical household's dual-fuel bill is 70% higher than it was at the start of 2021, before Russia's invasion of Ukraine. That amounts to approximately £600 more each year than pre-crisis levels, according to industry body Energy UK.
More and more people are struggling to pay their energy bills, with unpaid energy debt reaching a record high, according to regulator Ofgem. Suppliers estimate total unpaid bills and charges to have reached £6bn, and expect this to rise to £7bn by the end of the year. The average household in debt, without a repayment plan, owes more than the typical annual bill.
Even if you are not in debt, you still feel the impact; covering the cost of debt already adds about £60 to the average annual bill. Baringa reports that everyone could, on average, be paying £100 to cover the cost of unpaid debts by the end of the year.
Political Pressure for Assistance
The government faces increasing pressure to help those in need. Ofgem has proposed a debt relief scheme, and campaigners continue to urge them to implement it. Energy UK suggests a targeted plan for those most in need, based on benefits, health, and income data, which would cost £1.9bn. This is much cheaper than the £40bn commitment to protect everyone's bills after Russia invaded Ukraine.
However, funding this assistance comes with political challenges. It could be added to everyone else's bills, or ministers might choose to raise taxes, borrow money, or cut spending elsewhere—all difficult political choices.