A report by Energy UK has warned the government that rising debts create additional costs for suppliers which could eventually be passed over to customers through energy bills.
It’s predicted that household energy debt could reach £7 billion by the end of 2026 and could increase by another £1 billion just in the first half of 2027 without intervention.
Energy UK argues that this creates a cycle of struggling households accumulate debt while other bill-payers have to cover the costs.
The company are calling for targeted financial support on top of the Warm Homes Discount for families having difficulty in paying the bills.
It also wants the government and Ofgem to create an energy debt strategy this winter for regulatory changes to prevent further arrears.
Alongside this Energy UK say that Labour should remove the costs of the Renewables Obligation and Feed-in Tariff from domestic and non-domestic electricity bills and fund them through general taxation instead.
It argues that this would reduce electricity prices and help address one of the barriers to electrification.
Dhara Vyas CEO said: “It looks like energy bills in the New Year will approach the level at which the Government intervened following the invasion of Ukraine. We cannot afford to wait for the same scale of crisis before acting again. We must heed the lessons from that time.
“As the current debt levels illustrate, many households have not recovered from the last crisis, as energy bills and other cost-of-living challenges have continued to bite. The Government must act now to prevent this situation getting worse and causing even more problems over the longer term. Last-minute emergency interventions run the risk of being badly targeted and costing us all more.”
Despite the report focusing on the coming year, Energy UK are arguing that temporary financial support is not the answer and a long term reduction on the country’s reliance on gas could prevent future issues.
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