“The British energy industry risks seeing more suppliers collapsing on the back of so-called “bad debts” arising from consumer bills, according to a study by energy consultants Cornwall Insight and Complete Strategy.
Their joint report showed on Tuesday that household energy suppliers in the UK could be exposed to as much as £1.9 billion ($2.4 billion) of debt, a significant portion of which could be unrecoverable.
That debt could lead to more supplier failures, with the costs then added to consumer bills, which would further exacerbate the situation with fuel poverty in the country, the report warns.
The so-called bad debt will likely only grow, with the support provided by the government’s energy price freeze package rising from £2,500 to £3,000 for an average household, 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,” said Matthew Chadwick, lead research analyst at Cornwall Insight. “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.
The Public Accounts Committee reported recently that nearly 30 energy providers have failed since the summer of 2021, with the costs recovered through a charge on customers’ bills. British energy regulator Ofgem’s failure to properly regulate the supplier market has reportedly cost households an estimated £2.7 billion. Moreover, supplier Bulb Energy’s collapse is expected to add around £6.5 billion in costs to struggling Britons.
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