Energy Debt Owed by U.K. Families Could Leap 50%, CEOs Say

(Bloomberg) -- Britain’s biggest energy suppliers are warning of a huge increase in the number of customers falling behind on paying their bills as households struggle with soaring costs for gas and electricity.

The amount of money owed by customers is expected to be 50% higher by year’s end, Michael Lewis, chief executive officer of the U.K. arm of E.ON SE, told lawmakers Tuesday. The U.K.’s cap on energy prices surged to a record on April 1 for 22 million people, and it’s predicted to increase again later this year. That could put 40% of the population in fuel poverty, Lewis said.

“Come October, that’s going to get horrific, truly horrific,” Keith Anderson, CEO of Scottish Power Ltd., told the parliamentary panel. “The size and scale of this is beyond what I can deal with, beyond what I think the industry can deal with. It needs a massive shift, significant shift in the government’s approach to this.”

The wholesale price of U.K. gas has more than tripled in the past year, adding to mounting consumer costs. Regulator Ofgem’s price cap puts a limit on how much bills can rise, but it also contributed to the demise of 26 household suppliers that struggled to pass on costs. The cap could lift another 39% to 2,738 pounds ($3,563.40) in October, according to Investec Plc.

Lawmakers called in the bosses of the four biggest companies serving the U.K. -- E.ON, Centrica, EDF Energy Ltd. and Scottish Power -- to answer questions about pricing. Suppliers are concerned that they won’t be paid for the energy they’ve supplied unless the government steps in to help people pay their bills.

“It will get worse without any further intervention in October -- a lot worse,” said Chris O’Shea, CEO of the U.K.’s biggest supplier, Centrica Plc. More producers could go bust later this year in a way that could “dwarf” the failures last year, he said.

Overall, the cost of living for the average British family will be 1,100 pounds higher during the next 12 months, according to the Resolution Foundation think tank. The government has pledged a 9 billion-pound package to help with energy bills, but it has been criticized by some as not enough.

“Bear in mind, we’re looking at up to 30% to 40% of people going into fuel poverty,” Lewis said. “This is unprecedented, so it requires unprecedented action from government at this time.”

To help the country’s most-vulnerable households, Scottish Power’s Anderson said the government should introduce what he called a deficit fund. Under the proposal, 1,000 pounds would be taken off customers’ bills and then paid back over a decade, either spread among all bill payers or funded by the government.

“What we’re hearing already on the phone from people is a massive, massive uplift in anxiety,” Anderson said.

Ultimately, a new “social tariff” should be introduced to replace the price cap system for the poorest customers, he said. That would provide energy at discount prices to people in fuel poverty.

©2022 Bloomberg L.P.