Energy UK estimates £1bn debt increase

Debt in the retail energy sector has “significantly risen” by more than an estimated £1 billion in the last year, the chief executive of Energy UK has claimed.

It takes the total estimated debt within the sector to between £3.5 billion and £3.6 billion.

Emma Pinchbeck highlighted the difficulties being faced by the sector following the pandemic and subsequent global gas crisis, at Ofgem’s vulnerability summit in London on Monday (24 April).

Pinchbeck warned of the strain being placed on loss-making energy suppliers obligated to support increasingly complex consumer needs.

She said: “In a market in which businesses are already loss-making, any support for vulnerable customers, whether providing assistance or writing off debt, is currently either funded by the taxpayer or spread across other people’s bills, and we need to bear that in mind.

“Ofgem’s own figures say that retail sector debt stands at around £2.5 billion in 2022, but we think that figure has significantly risen and our estimates are that the debt in sector is now between £3.5 billion and £3.6 billion or around £129 pounds per house, on average.

“This is why it’s important for the regulator and for government to ensure that cost distributional impacts, which is wonk speak for ‘the cost impacts right across the system with our consumers and bills’ when we’re making interventions in the market for households and for industry are properly evaluated, we need impact assessments, we need to know what things will really do, and that they are transparently considered in conferences and rooms like this one.”

She further highlighted how fuel poverty is increasing and that at the end of September 2022, more than two million households were behind on their energy bills – a rise of about two thirds since the end of 2020.

“Retailers are reporting that some call centre volumes are up as much as 300% compared to previous years and the length of time on calls has also increased […] One of our small-medium retailers told me that they’re providing over £500,000 per week in credit to their customers,” she added.

Fears around mounting bad debt have been growing over the past few months, with Ofgem currently consulting on the impact of the pause of forced PPM installations. In particular, the regulator is considering tweaking bad debt allowances to accommodate for revenues lost during the pause.

Also speaking at Monday’s event was Ofgem chief Jonathan Brearley, who made the case for the introduction of a shared priority services register.

He said however that this “may not be possible” in the near future and casted doubt over whether the current systems “to manage, track and store information on vulnerable customers [are] really fit for the 21st Century”.