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Energy debt on the increase

Up to 6.5 million consumers owe money to their energy supplier, claims a new study by a price comparison site.

uSwitch, which provides an online and telephone comparison service, also revealed that more than half of those it surveyed said they owe more than they did this time last year.

The survey shows the average amount owed by consumers has increased 11% from ?114 this time last year to ?126, meaning that consumers could owe en estimated ?820 million to energy suppliers in total.

uSwitch claims that last year saw energy price rises of 42%, based on a medium user using a standard dual fuel plan and taken as an average across all six major suppliers, though many customers have only just started to see these increases reflected in monthly direct debit payments.

The survey shows just under three quarters of households paid for their energy bills by direct debit, but almost a third have only had their direct debit increased in the past three months.

Consequently, many are now playing catch up.

The delay, uSwitch claims, is due to suppliers having to review accounts before amending direct debits.

The comparison site said they cannot increase direct debits automatically because not everyone will need their monthly payments to go up.

The study claims the average energy direct debit is now ?85 per month and that suppliers increased direct debits by ?22 a month on average to compensate for last year?s price increases.

But almost one in 10 households saw their direct debits increase by more than ?50 a month.

Ann Robinson, director of consumer policy at Switch, explained: “Despite energy prices now starting to fall, almost a third of direct debit households have only started to feel the impact of last year’s price hikes within the last few months.

“Not only has this raised concerns over affordability, but it also suggests that energy debt is likely to continue to grow as so many households will be playing catch up.

“The danger is that consumers will cancel their direct debit because they cannot afford the increases, but will then end up paying more for their energy because they will lose valuable direct debit discounts.

Owing money to an energy supplier can also prevent people from being able to reduce energy bills by moving to a lower cost energy deal.”

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