Business Maverick

Business Maverick

UK energy debts balloon to record £1.3bn before most expensive winter as blackouts loom

UK energy debts balloon to record £1.3bn before most expensive winter as blackouts loom
A light on at a home near an electricity transmission tower in Upminster, UK, on Monday, 4 July 2022. (Photo: Chris Ratcliffe/Bloomberg)

Households in Britain are already a record £1.3-billion (R26-billion) in debt to their energy suppliers ahead of winter, when bills are set to surge yet again.

Consumers typically build up credit with their providers during the summer – when energy usage eases – limiting the shock of higher demand in the winter. But soaring gas and power prices have made this summer expensive and fuelled warnings of an even bigger crisis in the coming colder months, with the potential of looming “organised” blackouts.

Household energy debts as of July were more than double September’s level, according to price-comparison service Uswitch.com. Each year since 2018, when a UK price cap was introduced, household debts have gradually fallen during summer. But this year, debt increased by 10% between April and July.

“Energy debt has hit an all-time high with the worst possible timing, turning this winter’s energy price hike into a deeply precarious situation for many households,” said Justina Miltienyte, head of policy at Uswitch.com. “The cost-of-living crisis is already squeezing budgets dramatically, even during the summer months, as families struggle with rising bills in all areas.”

British energy suppliers earlier this year warned lawmakers about the huge number of customers falling behind on bills, and that the crisis will get beyond what any of them could handle. British wholesale gas prices have more than doubled since then, setting the stage for millions more to struggle to pay bills this winter.

Some 6.5 million households owe an average £206 to providers, Uswitch.com said in a report on Wednesday. The number of those in credit has fallen to 9 million from 11 million in April.

While regulation has shielded consumers from some of the price spike, that’s set to change in October when the energy price cap is next adjusted. Analysis from Cornwall Insight has projected average annual bills to jump more than 80% when the cap is next revised and climb further again early next year. 

Britain is also making plans for organised blackouts for industry and households over winter when cold weather may coincide with gas shortages.

Electricity capacity shortfall could total about a sixth of peak demand, according to the government’s latest “reasonable worst-case scenario”, even after emergency coal plants have been put to use, Bloomberg reported, citing people familiar with the government’s planning. 

Under that outlook, coupled with below-average temperatures and reduced electricity imports from Norway and France, Britain could be exposed to four days in January when it may need to trigger emergency measures to conserve gas, the report said.

The Department for Business, Energy and Industrial Strategy did not immediately respond to a Reuters request for comment.

The Bloomberg report comes after the Bank of England warned last week that Britain was on course for a long recession as unprecedented energy prices push inflation towards 13%, but any political response has been hampered by the race to select a new prime minister on 5 September.

While European governments seek to conserve gas usage and increase storage following Russia’s invasion of Ukraine, Britain’s government has split into warring camps led by Foreign Minister Liz Truss and former Finance Minister Rishi Sunak who, competing to be the next prime minister, have clashed over how to respond.

Charities, business groups and politicians have called on Truss and Sunak to set out how they would help Britons cope with a forecast 82% rise in energy prices in October. BM

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