Some households will soon pay up to £129 a year to bail out energy firms for unpaid bills
Some households could soon pay up to £129 to cover the cost of unpaid gas and electricity charges, a charity group warns.
A report from Warm This Winter said energy firms charged £842million this year to customers to cover ‘bad debts’, or unpaid energy bills from other homes.
But this is set to rise by an extra £735million from 1 April to £1.3billion, as energy regulator Ofgem will increase the amount that gas and electricity firms are allowed to charge to cover this.
How much each household will pay for these charges depends on how they are billed.
Going for broke: Campaigners say energy firms are effectively charging households more to chase unpaid debts from households that cannot afford to pay sky-high energy bills
From 1 April prepayment meter customers will now pay the least, at £25.17 per household per year.
Direct debit customers will pay £38.96 a year – but standard credit customers are hit way harder and will typically pay £129.71.
These are customers who pay as they go along by card or cheque.
This charge covers unpaid bills, the cost of recovering this sort of debt and a cash buffer for energy firms to tide them over between incurring a cost and getting paid by customers.
These fees also include the cost to energy firms of the ban on controversial forced prepayment meter installations.
Fiona Waters, from for the Warm This Winter campaign, said: ‘Energy bill payers are quite rightly up in arms about these additional costs which look like they do nothing to reduce the debt of ordinary people but instead helps energy companies pursue those who simply can’t pay.
‘It’s yet another outrageous rip-off caused by our broken energy system, where ordinary people are expected to foot the bill all the time whilst energy giants bank billions and their bosses live in the lap of luxury.’
Simon Francis, coordinator of the End Fuel Poverty Coalition, said: ‘The recovery of energy debt led to the forced prepayment meters scandal in 2023 and customers are still paying the price for energy firms’ poor practices.
‘Rather than hit hard-pressed households with higher standing charges, we need to see a longer-term approach to solving the energy debt mountain, such as an industry wide Help To Repay scheme.
‘If Ofgem persists in implementing this charge, the very least they can do is ensure it is used to write off debts from customer accounts and isn’t spent on hiring debt collection agencies.’
Despite the rise in energy costs to cover unpaid bills, these bills overall are slowly falling – though still remain high by historical standards.
The average dual fuel price-capped bill is £1,928 a year, falling to £1,690 a year from April 1.
An Ofgem spokesman said: ‘We need to address the risk posed by stubbornly high levels of debt in the system, so we must introduce a temporary payment to help prevent an unsustainable situation leading to higher bills in the future.
‘This highlights the limitations of the current system – we can only move costs around – and while prices are slowly falling as the energy market stabilises many people have been struggling to pay their energy bills amid unprecedented levels of debt and the legacy of this risks becoming an enduring problem.
‘We have taken action already – changing standing charges for PPM customers so they are not charged more than anyone else and toughening up requirements on suppliers to take care of their customers but a longer term solution requires us to take a step back and see the big picture which is why we have launched a call for input on affordability.’
