The escalating energy debt crisis as price cap set for rare summer hike

There is alarm over growing household energy debts as we learn the price cap is going up 13% this summer, with the potential for further hikes ahead.

Bills have been relatively stable, though still elevated, for the past three years in the wake of the price shock that followed Russia's invasion of Ukraine in early 2022.

Now, the global economy is experiencing a new war-related supply crisis affecting a fifth of oil and natural gas volumes.

Money latest: Price cap rise sparks concern

The energy regulator Ofgem said on Wednesday that the price cap - a default tariff and standing charge covering a majority of British households - would rise to £1,862 from July-September on the back of that Middle East conflict disruption.

Those on fixed rate deals are not affected until their terms end.

The scale of the debt problem

No-one can know, yet, what the winter will bring but we can be fairly sure it will not offer any respite to the more than two million households which already owe their suppliers money.

The figure has been rising for years, along with the sums of money involved, as the country has battled surging costs, largely since the end of the COVID pandemic.

Energy UK data shows the total owed at more than £5.5bn - a sum the industry lobby group expects to hit £7bn by the end of the year.

Ofgem's measure put the total at £4.55bn by the end of 2025.

New figures from Money Wellness, the free money advice service, show that the amount owed to energy providers has increased by 23% over the past three years, rising from an average of £1,848 to £2,270.

We are all paying for this debt mountain

What most bill-payers probably do not realise is that they are already contributing cash, through their own bills, to help account for this rising debt pile.

Typical dual fuel customers who pay by direct debit hand over an extra £50 a year under the price cap, while standard credit customers pay around £140.

According to Energy UK's estimates for total debt, households face stumping up an extra £10-£15 each per year over time.

What are the potential solutions?

Something has to be done.

It is clear that repayments are not keeping pace with ongoing, and widespread, cost pressures.

That risks not only more households falling into debt but those already behind, moving further into debt.

The Money Wellness service says the time has come for a national, automatically applied social tariff for energy, similar to the scheme within the water sector.

Its analysis of customers in energy arrears estimates that up to 87% of cases could meet eligibility criteria, including receipt of means-tested benefits, disability benefits, evidence of problem debt, or high essential energy use.

It argued that existing support was too complex and varied between suppliers.

What is the industry seeking?

Energy UK says current schemes, such as the warm home discount, are inadequate to help those struggling.

A recent blog by policy bosses at the supplier EDF pointed to a link between the toughened rules governing the installation of pre-payment meters three years ago and indebted households failing to make repayments.

You may remember the scandal over the forced installation of pre-payment meters? Following an Ofgem inquiry, British Gas was told earlier this month to pay £20m for its treatment of such customers.

EDF suggested that technology offered some help.

It argued for a smart metering-based approach, that allowed easier budgeting, remote and auto top-ups and near real-time monitoring of where consumers may need support, saying it would bolster supplier confidence on ability to pay.

There was some frustration too that a proposed industry debt relief scheme was apparently making little headway.

How about the government?

The chancellor has clearly signalled targeted support for energy bills ahead, assuming the Middle East disruption drives bills upwards, but what form that will take is yet to be divulged.

There is one thing you can do to bring your bill down

While those in debt to their supplier should be on a repayment plan, the rest should be seriously considering whether a fixed rate deal suits them.

They're not available to every home, such as those on pre-payment meters, but charities and price comparison websites are pointing to offers still more than £200 below price cap levels, on an annual basis, from July.

There are currently 22 million households on fixed rate deals; that is 40% of the domestic market shielding itself from any price cap movements for up to a year or more at a time of great energy insecurity.

Locking in the amount you pay for every unit of electricity and gas you use now could well be a smart play - a hedge against the chance of Middle East energy mayhem driving default tariff bills higher as we approach winter.

It offers some peace of mind but just make sure you can afford it.

Can you afford not to? That's the big crystal ball question that only the US and Iran can answer as UK families once again seek to avoid falling into energy debt because of rising costs.

(c) Sky News 2026: The escalating energy debt crisis as price cap set for rare summer hike