Households in Great Britain could owe their energy suppliers as much as £7bn by the end of the year after higher gas and electricity prices forecast for the winter kick in, an industry group is warning.
Domestic energy debt and arrears climbed by about £500m over the past year to a record £6bn at the end of June as the Middle East conflict continued to stoke rising gas market prices.
The amount of energy debt left unpaid for longer than 30 days is likely to accelerate to £7bn by the end of the year, according to the trade association Energy UK, as the government’s cap on gas and electricity prices is expected to climb to a three-year high.
The regulator is expected to confirm later this week a 4% increase on the energy price cap for millions of households from October as “too many households continue to feel the strain of high energy bills”, the group’s chief executive, Dhara Vyas, said.
She urged Andy Burnham’s government last week to consider a “targeted and more permanent” solution to the rise in energy bills – including a social discount tariff – rather than rely on “stopgap, ad hoc or emergency measures”.
The increase will more than wipe out the impact of the new prime minister’s promise to cut VAT from household electricity bills from October, which aimed to give voters “some breathing space” by shrinking bills by an average of about £45 a year.
“The current arrangements fail to provide the help needed and work out more costly,” Vyas said. “A social discount will address the fuel poverty gap and provide the right amount of support to the right households at the right time – reflecting that needs vary across different customers.”
The forecast energy price cap rise means that over the final three months of 2026 the typical household faces a gas and electricity bill equivalent to £1,729 a year, forecasters at Cornwall Insight predict.
The consultancy expects electricity rates to rise from 26.11p a kilowatt hour to 26.57p, and gas charges will rise from 7.33p to 7.90p for households that pay via direct debit. However, the actual bill for a household will depend on how much each consumes.
The average bill under the price cap was calculated assuming lower annual energy use than in previous years, because the high cost of energy has forced many households to use less gas and electricity as debt levels rise. Using the previous methodology, the price cap would be forecast to rise to £1,940.69 from October – the highest level since the summer of 2023.
Ahead of the new cap, Energy UK told journalists that the rising cost of sourcing gas from the global wholesale market was the single largest contributing factor to the expected rise, although the expense of upgrading Great Britain’s energy networks was also playing a larger role in setting energy costs.
