UK Households Pay £50 More for Energy Because of Unpaid Bills as Debt Hits Record £6B

British households are paying about £50 a year through their energy bills towards the cost of unpaid debts, as the amount owed by customers reaches a record £6 billion. More than three million customers were in debt or arrears at the end of June, with the average amount owed at about £1,800, according to figures from Energy UK.

Total energy debt has risen by about £500 million over the past year and could reach £7 billion by the end of 2026, the industry body said. Unrecovered debt is currently adding about £50 a year, or around 3%, to a typical household energy bill.

The £50 is not a separate charge. It represents the estimated cost of unpaid energy debt recovered through the wider energy market.

Energy Debt Hits Record £6bn

The £6 billion figure covers energy debt and arrears that have remained unpaid for more than 30 days. Ofgem generally uses a 90-day threshold when reporting energy debt, meaning its published figures are lower because they exclude some more recent arrears.

More than three million customers were behind on their energy payments under the 30-day measure at the end of June. The average outstanding balance was about £1,800.

Dhara Vyas, chief executive of Energy UK, said the rise was increasing costs for customers and putting pressure on suppliers. ‘The debt mountain is climbing higher, causing immense worry to many customers, adding growing costs to everyone’s bills and threatening suppliers’ financial viability,’ Vyas said.

The industry body has called for targeted support and measures to address household energy debt.

Unpaid Bills Add £50 to Household Costs

The estimated £50 annual cost of unrecovered debt is already reflected in the wider cost of supplying energy. It does not mean every household receives a £50 charge on its bill. Energy costs also include wholesale prices, network charges, operating costs, policy costs and other allowances included in Ofgem’s price cap.

But customers who pay their bills on time still bear part of the cost of energy that suppliers are unable to recover from customers in arrears. The cost could increase if the amount of unpaid debt continues to rise.

Debt Could Reach £7bn by December

The total amount owed could increase by another £1 billion between June and the end of 2026, according to the industry estimate. Higher energy costs could make it harder for households already in arrears to reduce their outstanding balances.

The rising debt also leaves suppliers carrying the cost of energy that has already been supplied but not paid for. The £7 billion figure is an industry projection rather than an Ofgem forecast.

Ofgem Price Cap Due on 26 August

The latest debt figures come as households await the next Ofgem price cap. The regulator is due to announce the cap for October 1 to December 31 on August 26.

The current cap runs from July through September after Ofgem raised it by 13%, with higher wholesale energy costs among the factors behind the increase. Cornwall Insight’s latest forecast puts the October cap at about £1,729 a year for a typical dual-fuel household paying by Direct Debit.

That would be about £66 higher than the current £1,663 level, based on Ofgem’s revised typical consumption figures. Cornwall Insight said the forecast would put annual bills at their highest level since July 2023 on a comparable basis.

The forecast is not the final price cap. Ofgem will announce the official level.

Another increase would add to existing balances, especially for households already in arrears, If the debt projection is reached, the amount owed by energy customers would have risen by about £1.5 billion in 18 months.