By Nina Chestney
LONDON (Reuters) – British energy suppliers could be exposed to around 1.9 billion pounds ($2.36 billion) of debt, some of which might be unrecoverable, due to more and more UK households being unable to pay their bills, a consultancy report said on Tuesday.
Cornwall Insight said with no action from policies or regulation, there is an increased risk of more supplier failures, potentially resulting in increased costs to consumers and a further exacerbation of the cost-of-living crisis.
There are under 30 UK energy suppliers operating in Britain, from a peak of nearly 70 in 2018.
The report said the number of consumers with no arrangement in place to repay their debt, and the average size of that debt, had increased throughout the last decade, with over 1.4 billion pounds of domestic consumer debt in the second quarter of this year for which there is no arrangement to repay the supplier.
Over the past six months, the End Fuel Poverty Coalition estimates that around 1.6 million customers have entered fuel poverty.
If only half of those experienced challenges with rising energy prices, then the debt rises to around 1.9 billion pounds.
“The knock-on effect of unpaid bills has the chance to be harmful to suppliers, many of whom were already working with very tight profit margins. The sad truth is, as bad-debt increases, so does the chance of supplier failure,” said Matthew Chadwick, lead research analyst at Cornwall Insight.
After March next year, a government energy price guarantee to limit the amount suppliers can charge per unit of energy will end. This currently lowers a typical household energy bill in Britain for dual fuel gas and electricity down to around 2,500 pounds a year.
“This will exacerbate the risk of supplier failures from April 2023,” Cornwall Insight said.
If suppliers fail, the costs associated with moving customers to another supplier and special administration for the exited suppliers will be passed on to consumers under current rules, only exacerbating existing issues around paying for energy, it added.
($1 = 0.8051 pounds)
(Reporting by Nina Chestney; Editing by Nick Macfie)
