Struggling With Energy Debt
It will come as no surprise to many people that energy debt is becoming an increasing problem. The last few winters have been severe by UK standards, with many individuals and families having to increase their heating and keep it on for longer than they normally did in the past. Energy companies have, at the same time, increased their energy charges, leaving many people with larger bills to settle than they ever had before.
Recent research published by the industry regulator Ofgem states that over one million electricity and 900,000 gas users are in debt to their suppliers. The average level of electricity debt stood at £291 per user in Q3 2010; up from £279 in Q3 2009. For gas users, the average debt level went from £264 to £289 (Q3 2009 to Q3 2010). Much of this increase was driven by extreme weather and rising charges per electricity / gas unit consumed.
Rising energy costs can become troubling if you experience an unexpected loss of income through redundancy, illness or the loss of a partner. Once manageable energy costs can become a serious strain on your total monthly budget and even increase the level of your debt.
If your energy debt is still at manageable levels, you may not need to seek specialist debt advice. You can work towards avoiding excessive debt levels by more tightly controlling your total monthly expenditures, of which energy bills are only one aspect. Budgeting helps to clarify where your money is going and what can potentially be reduced, leaving enough for essentials such as heating bills. Having a well defined budget can also help you save for events such as holidays, birthdays, Christmas, New Year and so on.
Debt advice becomes necessary when you are no longer able to pay your energy bills, which may lead to a knock on effect as other parts of your finances come under strain. Your debts may accumulate in the form of past-due bills, loan repayments, credit card debt and other repayments. The first step in addressing your debts may be seeking specialist advice from the Debt Advice Group. Speaking to debt specialists can give you a good idea of how to handle your energy bills more efficiently.
It may be possible to consolidate debt; a debt consolidation programme is one possible solution that is available to deal with high debt levels. It is a less drastic solution than turning to bankruptcy proceedings. Unpaid energy bills, loan repayments and other debts can be bundled together so that you have to pay one set charge that is then distributed among your creditors. Using a structured programme to consolidate debt is a good way of reducing the complexity of having to pay different creditors at different times. In addition, bundling your debts in a single debt package will often result in a lower rate of interest than many loans and credit cards.
In many cases, energy companies want to continue as your supplier. Even if there are outstanding debts, showing your electricity or gas supplier that you are trying to service your debts can keep your home heated.