In response to Ofgem’s announcement of a consultation on recovering bad debt, Dr Matthew Chadwick, Lead Research Analyst at Cornwall Insight said:
The energy price crisis has left millions of households struggling to pay their bills, even as prices have begun to fall. With government support all but ended for the majority of consumers, and the Default Tariff Cap failing to provide much-needed relief, the situation seems destined to remain bleak.
The mounting weight of unpaid energy debts is a crushing burden for suppliers, many of whom are already operating on razor-thin margins. We currently have 241 fewer domestic suppliers in the market than November 2020. The costs for failed suppliers ultimately fall on the shoulders of those paying their energy bills. Without intervention, suppliers and consumers could be trapped in a vicious cycle of rising bills, mounting debts, supplier failures, and even higher bills.
The question of how to recover these debts without saddling struggling consumers with even higher bills is not easy. Ofgem acknowledges that targeting only the vulnerable for debt repayment is both unfair and impractical. On the flip side, their blanket proposal to raise bills by £16 per year for all non-prepayment customers could be seen as placing the burden on everyone, regardless of their ability to pay.
To safeguard suppliers from collapse without increasing fuel poverty and bad debt, urgent consideration of effective measures, such as social tariffs, to support the most vulnerable in paying their energy bills, is essential.”
Figure 1: Number of domestic suppliers active in the market
Source: Cornwall Insight Domestic Supplier Insight Service
Reference:
- Cornwall Insight Domestic Supplier Insight Service:
November 2020: 47 domestic suppliers
November 2023: 23 domestic suppliers
- Ends
Notes to Editors
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About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
"Without intervention, suppliers and consumers could be trapped in a vicious cycle of rising bills, mounting debts, supplier failures, and even higher bills."
Matthew Chadwick Lead Research Analyst
