HomeBusinessUK energy providers with £7bn loan belonging to 16m households

UK energy providers with £7bn loan belonging to 16m households

Energy providers rake in nearly £7bn of customers’ money despite a cost-of-living crisis that has forced some households to choose between heating and eating.

More than 16 million UK households have a collective £6.7bn of credit to their providers, with half of them carrying balances of more than £200, research by comparison site Uswitch.com has shown.

The study said a combination of mild winter weather and an extra push by consumers to reduce energy use has left businesses with £5bn more in credit than at this time last year.

Typically, energy customers with direct debits will build up credit during the summer, when usage is low, and providers will reduce it during the winter months, when usage is highest.

However, consumers have complained that energy companies are hoarding hundreds of British pounds of their money this winter.

The practice threatens to stretch budgets already tested by the cost-of-living crisis and further damage the reputation of an industry that has suffered nearly 30 casualties since the energy crisis began in 2021.

Energy companies study wholesale prices and historical consumption of consumers to calculate their annual bills, setting their monthly payments based on this.

Uswitch research showed that the number of households with credit increased by 5m, up from 11m households in April 2022, and that more than eight million bill payers now have more than £200 in credit.

The analysis showed that the number of consumers in debt had fallen from six million to four million, and the total amount of debt had fallen from £1.2 billion to £920 million. However, the average amount owed by indebted households has risen from £188 to £234.

Uswitch research showed that customers in Plymouth had the highest average credit balance, at £603, while those in Norwich were most in debt, averaging £348. Leeds was the city with the highest proportion of households with energy debt, with 19%.

Consumers have the right to request that money withheld by their energy provider be returned to them, although only 14% of 2,003 UK energy bill payers said they intended to do so. More than half intend to leave those funds with their provider to reduce future bills.

Richard Neudegg, director of regulation at Uswitch.com, said: “This high level of any credit suggests that energy-saving awareness campaigns and cost-of-living support have played a role in protecting consumers from what it could have been an even more difficult situation. winter.

“It could also raise the question of whether direct debits set up by providers in reaction to energy price hikes have been much higher than they needed to be.

skip previous newsletter promotion

“Normally we would expect to see people come out of the winter with little or no credit balances, but a substantial number of households have weathered the storm, leaving providers with almost £7bn.”

Neudegg noted that while wholesale prices have fallen since December, meaning bills will soon start to fall, they will remain high compared to historical averages.

Gas and electricity bills began to rise in 2021 and spiked last year when the war in Ukraine caused a spike in wholesale energy prices. The government stepped in last fall to cushion the worst of the effects, subsidizing bills through schemes run through energy companies.

The new research could reignite a dispute in the industry over whether customer deposits should be protected. Ofgem, the energy regulator, accused providers of using customers “like a company credit card with no interest” but then stopped short of ordering full protection.

Earlier this year, The Guardian reported on each company’s approach to credit balances after allegations by consumers that they were being bullied by their energy providers.



Please enter your comment!
Please enter your name here

Most Popular

Recent Comments