Analysis by the energy market regulator Ofgem, seen by the Herald, shows that £1bn has been added to a debt mountain across the UK in the last year alone with some £2.916bn owed on energy bills as of the end of September, last year.
Three years before energy prices started to surge it was at £1.549bn.
The current levels of debt, which take into account those who have been arrears for over 91 days, are at their highest level since Ofgem began its round of tracking in 2018.
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Scots groups and campaigners are among those who are now seeking a scheme to write off the level of debt to the most vulnerable.
Energy Action Scotland, National Energy Action and Alba deputy leader and fair energy prices campaigner Kenny MacAskill say urgent government action is required.
Former justice secretary now East Lothian MP, Kenny MacAskill, who has been tracking the effects of the rising energy prices said a lack of strategy to deal with the debt mountain is “shameful”.
UK government ministers are being urged to implement a targeted ‘Help to Repay’ debt repayment scheme, to give relief.
The government-funded scheme would provide debt relief in the form of writing off eligible energy arrears.
It would also involve repayment matching a scheme that would match each pound repaid with an equivalent amount of debt relief.
NEA say a poll of 2,000 UK adults found that three quarters of think people who have fallen into energy debt due to high prices should be given help to reduce what they owe. They say the costs of such a scheme could be flexible and would not need to be enough to cover all of the debt in the market.
The surge has come as average dual fuel energy bills across the UK nearly trebled from the winter of 2020/21 to April, 2023 after the UK government brought in a £3000 Energy Price Guarantee as a cost of living crisis intervention.
Russia’s invasion of Ukraine in early 2022 catapulted the price of gas and oil to record levels – with the price cap soaring and bills set to go even higher later in the year.
Now, under the energy price cap set by the regulator Ofgem which limits how much suppliers can charge households for each unit of gas and electricity they use average bills have dipped from January to £1,923.
But that it is still nearly twice the amount that was set by Ofgem three years ago, as bills started to go up.
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And this winter there has been no sign of the reintroduction of a £400 energy bills support scheme to help households as was the case last winter when the UK Government’s Energy Price Guarantee set average dual fuel bills at £2500 per year.
An estimated 28 million households received a £66/£67 monthly discount on their energy bills between October 2022 and March 2023, under the scheme.
Frazer Scott, chief executive of Energy Action Scotland was concerned that Scotland’s energy debt share would be close to £300m – but feared that it would be even higher because Ofgem analysis does not take into account those who had arrears of under 90 days.
“The winter period will add to this debt,” he warned.
“The UK Government has no plan to deal with this debt. Ofgem has consulted on applying a charge to energy bills to begin to recover it.
“But we believe that more needs to be done to help people repay debt but nothing seems forthcoming. “Alongside ‘Help to Repay’ would be the introduction of the social tariff to begin to reduce the cost burden that created the debt in the first instance.”
The introduction of a special social tariff to ease the effect of price hikes for those in fuel poverty, paid for by those who can afford to pay or through government support formed part of a plan tabled with ministers in 2022 by ScottishPower’s chief executive Keith Anderson to help ease the pressure on people struggling to pay their energy bills.
Mr MacAskill said the level of debt was “extraordinary” and added: “Basically debt is mounting as bad weather is hitting and prices are rising again. There’s no way many can meet current let alone past bills. There needs to be a write off but nothing so far.
“Something like that is needed. Otherwise this will just hang and worsen.”
There are fears that the Scottish Government is way behind in a bid to hit a target that no more than 1% of households would be in extreme fuel poverty by 2040.
The Scottish Fuel Poverty Advisory Panel has raised concerns about the “particularly worrying” rising levels of fuel poverty in Scotland.
The panel which oversees the Scottish Government’s progress in its strategy for tackling fuel poverty and acts as a statutory consultee is concerned over the current extreme fuel poverty rate from March which estimates there were 739,500 households in extreme fuel poverty – around 29% of homes. That’s a rise from 12.4% in 2019.
The panel said there was a “stark contrast” in the current extreme fuel poverty rate and the targets that have been set.
Fuel poverty relates to households that must spend a high proportion of their household income to keep their home at a reasonable temperature. It is affected by three key factors – a household’s income, their fuel costs, and their energy consumption, which in turn is affected by the energy efficiency of the home.
Extreme fuel poverty is defined in Scotland, that after housing costs, the total fuel costs needed to maintain a satisfactory heating regime are more than 20% of the household’s total taxable income.
The EAS added: “The perversity of the application of debt charges to household bills means that whilst the debt reduces within the system no individual household debt is reduced. It means indebted households will be paying a debt premium that doesn’t reduce their debt but increases costs that they were already struggling to pay,” the said.
“Individual household debt reduction or write off then becomes a matter for suppliers to manage. And of course, they will write off some of the household debt as money is returned to them through debt charges but it isn’t an elegant or joined up system. It is a vicious cycle for the households and worryingly with no sign of substantial reductions in energy costs domestic energy debt can only endure.
“The levels of domestic energy debt being reported through annual accounts of companies must be a shareholder and investor concern, especially if there is no clear pathway for that debt to be reduced over time.
“It demands UK Government action because of both the risks of company failure and the risks to households from debt.”
Analysts Cornwall Insight has predicted that Ofgem’s price cap, representing the average annual dual fuel bill for a typical household in Great Britain, will fall from the current £1,928 to £1,620 from April.
It has predicted that prices will remain lower than the current cap throughout 2024, falling to £1,497 a year in July before rising slightly to £1,541 in October.
The energy price cap in in the winter of 2020/21 before prices started to soar was £1042.
The energy price cap was introduced by the government and has been in place since January 2019, and Ofgem is required to regularly review the level at which it is set.
It ensures that an energy supplier can recoup its efficient costs while making sure customers do not pay a higher amount for their energy than they should. The price cap, as set out in law, does this by setting a maximum that suppliers can charge per unit of energy.
Energy minister Gillian Martin said: “The UK Government has continually failed to take the necessary steps – which only it can take as energy is reserved – to ensure households and businesses never experience an energy crisis like this again. Scottish ministers have repeatedly called for a social tariff, which would provide the right and fair support for some of the most vulnerable people in society.
“The UK Government has so far chosen not to deliver such a mechanism, which could help address this unacceptable level of inequality and fuel poverty.”
A UK Government Department for Energy Security and Net Zero spokesperson said: “A social tariff is about protecting vulnerable people and that’s exactly what we are doing by providing significant financial support for those who need it most.
“We’ve cut National Insurance for 29m working people, a tax cut worth £450 for the average worker and our actions have helped to more than halve inflation since last year. On top of this we are increasing the National Living Wage to £11.44 this year, and boosting benefit payments for around 5.5 million households by an average of £470 a year.
“This is alongside direct targeted support for those who continue to need it, including £900 in cost-of-living payments, £150 to those on eligible disability benefits, plus a further £150 Warm Home Discount.”