On April 1 2025, the energy price cap, which is the maximum amount suppliers can charge, will rise by 6.4%. This is the third consecutive quarterly increase, and a rise of 9.4% compared with the limit set the previous April, which amounts to an increase of £159 on the typical bill.
Meanwhile, benefits such as universal credit are being increased by only 1.7%, which will mean those on low incomes will find it challenging to pay for the energy they need. The increase is so low because, every April, benefits rise in line with the rate of overall inflation for the previous September.
State pension increases have outpaced increases to working age benefits due to “the triple lock”, which ensures annual increases are pegged to the highest of earnings growth, inflation or 2.5%. Nonetheless, the state pension is set to rise by only 4.1%.
Combined with the loss of the winter fuel payment (at least £200 a year) for all but the poorest pensioner households, the price cap rise will especially hurt those who are just above the threshold to receive pension credit.
People in low-paid work will fare slightly better. But still, the minimum wage rise of 6.7% for those over 21 in April 2025 will not keep pace with the 9.4% annual increase in energy prices. Essentials, such as energy, make up a greater proportion of spending for low-income households, so these price rises will have a greater impact here.
Energy debt highest since 2012
Energy regulator Ofgem reported those in arrears (without a repayment plan) owed an average of £1,568 for electricity and £1,324 for gas at the end of September 2024, an annual increase of 33% and 85% higher than debt levels in September 2021.
Even for those on repayment plans, debt remains high, having risen by two-thirds since the start of 2022. Record levels of energy debt – the highest since records began in 2012 – are inflating bills for all consumers, as energy providers seek to recover the cost of debt. This situation looks set to worsen, given that this data precedes price rises since October 2024.
Moving to a fixed rate or cheaper tariff with another supplier is not possible for those with more than 28 days unpaid energy bill debt. Households at risk of going into debt also tend to ration their energy use or self-disconnect. But living in a cold home risks damp and mould, which has severe health consequences.
Available help is not enough
The government is expanding the warm home discount scheme to make more households eligible for an annual payment of £150, but it is unclear at this stage who will benefit. The payment may not be enough, since price cap changes mean that from April 2025, average annual bills will be £159 more expensive. Crucially, energy debt repayments are not reflected in the government’s fuel poverty calculations.
The government urgently needs to introduce an effective debt relief scheme.
Ofgem has acknowledged that energy is essential for everyone and that disconnection has harmful consequences. It also recognises energy market failures prevent those with small debts from accessing better deals. The regulator recommends a debt relief fund of up to £1 billion to help vulnerable households that have been affected by the energy crisis and for suppliers to adopt consistent standards in handling and preventing debt.
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For the full article by Dr Elaine Robinson visit the Conversation.
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