Households across Great Britain could owe energy suppliers as much as £7 billion by the end of 2026 as higher winter gas and electricity prices place further pressure on household finances, according to warnings from the energy industry.
The forecast comes after domestic energy debt and arrears reached a record £6 billion at the end of June, increasing by about £500 million over the previous year amid continued volatility in wholesale gas markets.
Energy Debt Forecast to Rise as Winter Bills Increase
Energy UK, the trade association representing the sector, expects debt that has remained unpaid for more than 30 days to accelerate during the final months of the year, potentially reaching £7 billion.
The warning comes ahead of an expected increase in the household energy price cap from October. The regulator is due to confirm the new level later this week, with forecasts suggesting an increase of around 4%.
Dhara Vyas, chief executive of Energy UK, said the outlook reflected the continuing financial pressure facing consumers as energy costs remain elevated.
She said “too many households continue to feel the strain of high energy bills”.
Higher wholesale gas prices, influenced in part by continuing conflict in the Middle East, have added to concerns about the cost of heating homes during the colder months.
Typical Annual Energy Bill Forecast at £1,729
Energy market consultancy Cornwall Insight predicts that the price cap will leave a typical household facing gas and electricity costs equivalent to £1,729 a year during the final three months of 2026.
For customers paying by direct debit, electricity rates are forecast to increase from 26.11p per kilowatt hour to 26.57p.
Gas prices are expected to rise more sharply, from 7.33p per kilowatt hour to 7.90p.
Although actual household bills depend on energy consumption, the price cap limits the rates suppliers can charge for each unit of gas and electricity, alongside standing charges. As a result, households using more energy can still face bills considerably above the headline annual figure.
VAT Cut Could Be Offset by Higher Energy Prices
The expected October increase is also likely to outweigh the benefit of the government’s planned reduction in VAT on household electricity bills.
Prime Minister Andy Burnham has pledged to cut VAT on domestic electricity from October as part of measures intended to ease cost-of-living pressures.
The change is expected to reduce average household bills by about £45 a year, giving consumers what the government described as “some breathing space”.
However, the forecast rise in the price cap means many households could still see their overall energy costs increase as Britain enters the winter heating season.
Energy UK Calls for Social Discount Tariff
Energy UK has urged the government to consider longer-term measures targeted at households struggling most with their energy costs.
Vyas called for a “targeted and more permanent” approach, including the introduction of a social discount tariff, rather than continued dependence on “stopgap, ad hoc or emergency measures”.
Such a system could provide discounted energy rates to eligible households, with assistance focused on consumers facing fuel poverty or persistent difficulties paying their bills.
“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.”
Record Arrears Add to Cost-of-Living Pressure
The rise in outstanding energy debt highlights the continuing strain on household budgets despite government measures designed to reduce living costs.
With arrears already at a record £6 billion and winter prices expected to increase, the coming months could prove particularly difficult for households that have fallen behind on payments.
If Energy UK’s forecast proves accurate, unpaid household energy debt in Great Britain will rise by another £1 billion by the end of the year, intensifying calls for longer-term support as consumers face another winter of elevated gas and electricity costs.
Graham Greene is a contributor to Dealmakerz, covering news, politics, business, technology, sport, entertainment, and lifestyle. He focuses on clear, accurate reporting and useful information that helps readers stay informed about current affairs and developments that matter to them. His work highlights relevant stories, emerging trends, and key issues, presenting them in a balanced, accessible, and reader-friendly way.
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