Gas and electricity burning a hole in household finances

Gas and electricity burning a hole in household finances

22 January 2010 / by Rachael Stiles

Energy debt is continuing to soar, as price cuts in the gas and electricity market last year only 'scratched the surface' of previous increases, says uSwitch.com.

Reacting to Ofgem's quarterly social obligations report, which recorded a 13 per cent rise in electricity customers entering into debt repayment arrangements and 21 per cent increase in gas customers in quarter three of 2009 compared to the previous quarter.

The average level of debt was found to be 20 per cent higher in the third quarter compared to the same period in 2008.

And the recession is not entirely responsible, according to uSwitch, as higher energy prices continue to squeeze household finances and providers have not lowered them enough to make a significant difference following the sharp increases in 2008.

Last year, gas and electricity prices were cut by four per cent for the average household, or £54 a month, but this is "scarcely scratching the surface of the 42 per cent or £381 increase seen by households the year before," the price comparison website claims.

The average annual energy bills now stand at £1,239, a 36 per cent increase compared to the beginning of 2008, which equates to an additional £327 a year, which has forced some UK households to face difficult decisions between heating and food.

Commenting on the Ofgem report, Thomas Lyon, energy expert at uSwitch.com, said: "The recession will have played a part but Ofgem cannot afford to brush the cost of energy under the carpet."

Mr Lyon warns that this situation could deteriorate further as the UK struggles through its coldest winter for 30 years, which could exacerbate thing by adding an extra £60 to the average quarterly bill as households turn up the heat to keep warm.

There are several ways that households can try to combat the expense of energy, Mr Lyon suggests, such as switching to direct debit which helps by spreading the cost; he also urges bill payers to compare gas and electricity providers to ensure they are on the cheapest tariff for their area.

Gareth Kloet, head of utilities at rival website Confused.com, says "It's never nice to think of customers falling into debt and risking disconnection, especially during these cold winter months." 
It's shocking, he said, that nearly a third of customers pay by cash and cheque, which can add to the cost of their bills.

"By opting to pay by direct debit, choosing an online tariff or simply changing supplier, customers may be surprised by the size of the savings that can be achieved," he said.

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