UK Energy Suppliers Face Soaring ‘Bad Debts’ Over Unpaid Bills

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(Bloomberg) — The British government, and the energy industry, face a wake-up call otherwise risk seeing more suppliers collapsing in the back of so-called “bad debts” from consumer bills, a new report warns. 

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Household energy suppliers in the UK could be exposed to as much as £1.9 billion ($2.4 billion) of debt, of which a significant portion could be unrecoverable. The debt could lead to more supplier failures in a worst-case scenario, new research from energy consultants Cornwall Insight and Complete Strategy, published on Tuesday, concluded. 

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That’s a problem for consumers across the country, as the costs of failed suppliers get added to their bills and more people are expected to fall into fuel poverty, at a time when Russia’s curtailment of energy supply to Europe has already pushed domestic prices to record highs and consumers struggle with inflation.

Since the summer of last year 29 energy providers have failed, with the costs recovered through a charge on customers’ bills, the Public Accounts Committee said in report in November. The UK energy regulator Ofgem’s failure to properly regulate the supplier market has cost households an estimated £2.7 billion since July 2021, the panel added. Meanwhile, the cost of Bulb Energy Ltd.’s collapse alone is expected to rise to £6.5 billion that will be shouldered by Britons struggling to make ends meet.

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The so-called bad debt will likely only grow, with the support provided by the government’s energy price freeze package changing from £2,500 to £3,000 for an average household, exacerbating the risk of supplier failures from April 2023, according to the consultancy firms.

“There needs to be a clear path for suppliers to recover the increasing levels of bad debt they are incurring,” Matthew Chadwick, lead research analyst at Cornwall Insight, said in a statement. “In practice, this means that the costs of bad debt will either need to be carried by the suppliers or by customers who are in a position to pay,” he added.