Energy firms warn bad customer debts will rise by 50%

Lewis was giving evidence on 19 April as part of the select committee’s inquiry into how energy suppliers are handling the price crisis.

He said between 30% and 40% of people in Britain could fall into fuel poverty this October, when Ofgem is expected to again hike the annual limit on tariffs. He further commented that more people entering fuel poverty would lead to a substantive increase in bad debt this autumn.

Analysts at market research firm Cornwall Insight, who predicted the £1,971 price cap within a three percent margin of error, said they now expect the next price cap increase to result in the average tariff jumping to £2,599.92.

Keith Anderson, chief executive of Scottish Power, told the committee he was “massively concerned” as he called for the introduction of a £1,000 deficit fund or social tariff for vulnerable customers. 

His suggestion consisted of a form of loan, whereby £1,000 would be taken off the bills of the poorest people and the government or consumers would pay it off over the course of a decade. 

“Come October that’s going to get horrific, truly horrific,” said Anderson. “It has got to a stage now where the size and scale of it is beyond what I can deal with, beyond what I think this industry can deal with. I think it needs a massive shift, a significant shift in the government policy and approach towards this”.

Simone Rossi, chief executive of EDF, added that: “We now see bills being higher for longer, so I would expect government to reassess in short order to see what is possible”. 

He said EDF had experienced a 40% increase in call volume from consumers worried about debt. 

In a previous meeting, MPs on the committee heard complaints that suppliers were disproportionately increasing direct debits and forcing people onto more expensive fixed rate deals instead of the capped variable tariff.

This prompted chief executive of Ofgem, Jonathan Brearley to say that fuel bills would be concerned to ensure fair charges. 

Brearley told BBC Radio 4: “We’re going to take a close look at those direct debits. We’re going to make sure that they are raised fairly – clearly prices have gone up – and if they haven’t been we’ll take action and make sure companies put it right.

“You shouldn’t take more than is necessary. You shouldn’t be building up a credit balance,” he said.