Take action now to avoid debt to energy suppliers

22 April 2008 / by Daniela Gieseler
Nearly 7 million British households are in debt to their energy suppliers, some of them even unwittingly, new research by comparison site uSwitch reveals, with the average debt amounting to £114.

And, the 6.8 million debtors could even grow further, uSwitch warns. Although energy prices have risen by a whopping 15 per cent since the beginning of the year, many customers paying by direct debit have not increased their monthly payments yet.

The average annual energy bill has now risen by £136 to £1.048, and 19 million (76 per cent) of households pay by direct debit – but gas and electricity providers are not allowed to change direct debits automatically before they have reviewed the accounts, in order to make sure that consumers pay the right amount.

However, on the flip side this means that many consumers underpay until their account is reviewed. Accordingly, a costly surprise might await customers who do not take action themselves and ask their suppliers to change their direct debits now.

Despite having been informed about the price increases by their suppliers, only 13 per cent of direct debit customers have asked or will be asking for an amendment of their direct debit, the survey found.

This might partly be due to lack of information: only roughly a third (29 per cent) confirmed that their energy supplier had provided them with an estimate or with guidance on how much their bills would go up.

Unfortunately, many customers are completely unaware that they are running up arrears which might leave them stuck with their current providers if they wish to switch to a cheaper supplier. If the outstanding debt is more than £100 suppliers can refuse the switch to another provider.

"This issue has to be tackled now before it snowballs further," Ann Robinson, Director of Consumer Policy at uSwitch.com, warns, "Owing money to an energy supplier can prevent consumers from being able to reduce household expenditure by moving to a lower cost energy deal."

She urges consumers to take a more active role in managing energy bills: "Don't just sit back and wait for your supplier to review your account. If you are near or already in the red and can afford to increase your payments, contact your supplier. Simply relying on estimated bills after a price rise could be a shortcut to debt."

Further research by Ofgem suggests that debt to energy suppliers is indeed on the rise: More than 2 million consumers are on debt repayment programs to providers, and energy debt cases have risen by a third.

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