Money Box Live: Energy Debt Help

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BBC Sounds. Music, radio, podcasts. Hello. People owe more money for gas and electricity bills than ever before. New calculations suggest the average typical energy debt is £1,500. That's up £300. And the grand total owed to energy companies is £3.8 billion. And as we'll hear in this podcast, the reality of a big bill can be a frightening one. I was scared. I was panicking. Who's got 1,400 quid?

Energy prices are forecast to rise by 5% from April, adding £85 to the typical annual household bill, taking it to more than £1,800. So in today's podcast, we're finding out how to get help with energy debt and how to avoid...

going into the red in the first place. With me today in the studio in Salford are Matthew Sheeran from the free debt advice provider Money Wellness and Eleanor Taylor from Beringa, the consultancy which has been calculating customer debts. Welcome to you both. Thanks for being here. with us we'll talk more about the facts and figures in a moment but first let's hear from Neil who's been telling us how he was surprised to find himself in energy debt

and shocked at what then followed. At the time, he was new to paying the bills. His partner used to do it, but when they split up, he'd try to switch to a new energy supplier and got things a bit mixed up. I just used to give a... 500 quid a month and she just paid all the bills. I obviously had to move in on my own and I'd never been on before. I started paying the gas and lecky monthly myself. So three months down the line.

I get a letter saying you owe X amount. A couple of weeks ago, I got a text message. Basically, the text message said that one of the enforcement officers... is on his way round to yours now to collect. And I was in work at the time. I was panicking. I was scared. Because he'd actually said to me, have you got 1,400 quid to pay now? And I was like, what? no middle of the month just after christmas who's got 1400 quid and i was like and he was and i thought

What happens if I get home later and there's someone waiting at the door for me? I think as well it was affecting my performance and work and that's what I found. I found it was affecting me in work.

It turned out Neil had stopped paying his old energy company before the new arrangement kicked in, and that's why he owed money. Matthew, your organisation's dealt with Neil's case. What can people in his position do?

I think what the most important thing is to do is just get in touch with your energy provider first and foremost. They're going to have lots of different schemes, help and grants that might be available to him. So I think the first thing you do is pick up the phone and speak to your provider. Where you can't quite get the help that you need or you think you're struggling with your bill, I think it's really important that you do speak to organisations such as Money Wellness.

We'll look at grants, we'll look at ways that we can help with your bills, and we'll look at solutions to deal with the problem. In Neil's case, it was a mistake that got him into debt, but many people will be in debt because they simply can't afford their bills. Is that what you're hearing a lot of the time?

Absolutely. You know, what I would say is that the people that we're seeing in debt is changing a lot from a couple of years ago. Initially, it'd be mainly people with credit card debts, loans, you know. fell behind with the catalogues. That's really changed and utility bills are a real core debt that our customers have at the moment. Around one in three of our customers have a debt with their energy provider. How common is it for debts to rack up without a customer realising?

oh so common you know plenty of people are moving houses frequently and all it takes is thinking that you've paid a bill you've not changed your address on the system and you'll be getting plenty of bills sent to an old address, so it is really common. Neil is unfortunately the norm in that situation. Well, Eleanor, you've been looking at typical customer debts at a number of large energy suppliers, more than half the market in terms of share. Do you have a sense of how many people are in debt?

Absolutely. So the work we've been doing has shown that one in five customers is in debt to their energy supplier. And you've talked about the figures that £1,500 is the average debt value that we're seeing. So it's a really high amount, especially when you put that in the context of an average.

annual energy bill so if you look at the current price cap it's just over £1,700 for a year's consumption so a year's worth of consumption that some households are owing to their supplier and I think if you look beneath those numbers that 20% hasn't changed.

from when we did this work a year ago. So I sat here last year on this programme and talked about £1,200 as the average amount owed to suppliers. So the amount that is owed is getting higher, but it is the same people struggling and they are struggling even more.

I mean, one in five people, that's two in every 10, 20%. That's a really big number. What's driving this? So I think it's looking back over the last couple of years and the big... economic shocks that have hit households in the uk so starting with the the pandemic and a lot of people's income was you know disrupted massively impacted by that and then in 2022 with russia's invasion of ukraine that caused a huge energy price spike

in the country and so suddenly energy bills became high. There were a lot of emergency interventions to help households during that period and we saw the £400 credit go to households for energy specifically. A number of those emergency measures have now

understandably ended. But we're now seeing that lag effect of those households who struggled with costs two, three years ago. That is now translating into the energy suppliers debt books as they're no longer able to pay those bills. And we're starting to see that as old debt. coming through in our reports. And will the money owed be simply the money that has been spent on energy or does it also include fees that you rack up because you're owing the money to the company?

Well, there are effectively administrative and operational costs for suppliers to carry this debt. And it is adding to their operating costs as a business for managing those customers, billing their accounts, and in some cases trying to recover that debt.

That would include charges. Matthew, Neil talked about how he was so stressed out about being chased for money owed, it was affecting his work. Debt can be an awful mental load, can't it? And I guess that can then affect your ability to deal with it. 100%. What we hear so many of our customers say is that they start to bury their head in the sand because they're so worried, they're so anxious.

And that really leads to people that are then getting more debt because they're too scared to pick up the phone and ring the provider and pay whatever usage they can. So, you know, mental health and debts do unfortunately go hand in hand.

Well, we've contacted Energy UK, which represents suppliers, and it told us that there's been £500 million of extra support this winter. And it says people should get in touch with their supplier, as you say, Matthew, if they need help. It also said it needs action. to help those in debt support to make energy bills affordable for all.

Well, let's hear now from Moneybox reporter Dan Whitworth, who can tell us about a big development in our investigation into back-billing. The Energy Secretary, Ed Miliband, has written to the chief executive of the industry regulator, Ofgem, asking him to... to take action. Done.

Just remind us, what is backbilling? OK, so it's really simple, Ruth. It is a new bill for energy used more than 12 months ago. And crucially, it was banned by the regulator by Ofgem in 2018. So if you get one of those, you're supposed to... is acting against the rules.

And yet the Moneybox investigation we've been doing has revealed it's widespread. It is, and it has done, because we don't know the full extent, but we do know some sense of scale. So 3,308 complaints to the Energy Ombudsman in the space of just one. We've had hundreds of people contacting the BBC and continuing to do so, so it's clearly still happening. And there's just one example I want to talk to you about, Ruth. David contacted us about his back bill of thousands of pounds.

On the 2nd of December, I received a bill which came to £11,432.17. I have received more and more threatening letters. Demanding money with what I consider to be menaces, it is a disgrace. Now, funnily enough, after featuring in our reports, David Supplier contacted him, apologised profusely, admitted breaking backbilling rules and removed £9,512 of...

that backbill. We have dozens and dozens of examples just like that, Ruth. And the issue of backbilling was already getting political before this week. We spoke to Bill Esterton, MP.

quite a senior MP a couple of weeks ago. He's chair of the Energy Select Committee. He told us, well, he in fact described suppliers' behaviour on this as outrageous. He also wrote to the boss at Ofgem, the regulator, asking... them to intervene asking them to take action urgently energy uk which speaks to suppliers well they say they're doing their best to help and support customers and when they get it wrong they are of course sorry but they added the reality is this issue is a common

So what could the Energy Secretary's intervention this week mean for people? It's significant. There's no two ways about it, Ruth. I've got a copy of the letter in front of me. It's two pages. It's from Ed Miliband, obviously the Secretary of State for Energy. So, you know, very senior, senior politician in the UK. Most of the first page is just outlining what the government is doing.

It's ambitions for energy and that kind of thing. And then he's got six bullet points, which, and this is a letter that's addressed to the boss at Ofgem, the regulator. And the very top, the very first bullet point is all about billing and in particular back billing.

quote you a couple of things here, Ruth. So this is Ed Miliband, Secretary of State, to the Ofgem CEO, Jonathan Brearley. I urge you to continue to challenge unlawful backbilling through your compliance work. Alongside this ask, you accelerate your...

work into reviewing back billing rules and this this next bit is particularly significant this could have a real day-to-day impact including reducing the back billing window for households with smart meters from 12 months to six months so halving that time period

suppliers are allowed to charge people for. That's really significant. And again, all of this is to Ofgem and obviously Ofgem is the regulators and they're de facto in charge of suppliers. So that's really, really significant in terms of the previous letter. In the meantime, if someone gets one of these bills, what should they do?

In the very first instance, you need to complain to your supplier. Now, if you're convinced and if you get advice and if you realise this is a back bill, you do not have to pay it. You are not under any obligation to do so, but you must contact your supplier to say that. Make it clear that you know it's a back bill, that it's breaking off gem regulations. And also...

There's two things at play here, Ruth. One is these bills should never be getting sent out. That's really, really bad. The second thing is the experience of dozens of the people who have contacted the BBC. When they contact their supplier, the response they get from their supplier is atrocious. David is just one, as I say, of dozens of people.

people who have contacted their supplier that we know of, who have then felt really quite intimidated. They've felt under pressure to pay these bills, which they should never be getting sent. The backstop for consumers on this is the energy ombudsman. So complain to your supplier. There is a little...

you have to either wait eight weeks from the first moment of your complaint or until the energy supplier says right okay we're going to close this complaint now but you can go to the energy ombudsman crucially it is independent of suppliers they can look at all the information

hear from your supplier's point of view as well, but whatever they decide, the supplier has to do. And if it's a clear case of backbilling, they will come out on your side, tell you not to pay the bill, and your energy supplier's going to be in some trouble for that.

Well, thank you, Dan. Aside from backbilling, the Energy Secretary also said the government is helping to deliver £1bn worth of support to households through the warm homes discount and is determined to bring energy security to the country. We'll have more on the later... us with our backbilling investigation on Saturday's programme with Paul Lewis.

Because Vivint adjusts your thermostat when it knows you're out, it's a smarter way to save. When Vivint guards your packages from Prowlers, it's a smarter way to protect. And when you can lock the doors and dim the lights for movie night with a single tap, well, that's a smarter way to live. To get the smarter home system that just gets you, go to Vivint.com or call 1-855-4-VIVINT. Live intelligently.

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Now let's hear from listener Pema from Suffolk who heats her home with oil and wood and says her electricity usage doesn't really change with the seasons. and is in credit with her supplier, but would rather not be, or at least would rather not pay more than she needs to. I contacted Moneybox because I was sick to death of having to contact our energy company every three months when they would try to raise our direct debit by usually at least £30 or £40.

And every time they have to go back and forth to a supervisor and they keep saying, but we have to raise your direct debit because our system shows from your smart meter. that you are due to use more electricity than you're currently paying, and we want people to have enough in their account. When I point out... that, in fact, our electricity use stays the same throughout the year and that it's consistent over 12 months. And they will argue and argue to try and say, well, they have to do that.

So you're frustrated that your energy company is basically wanting to decide for you what the right amount is? for you to pay years. It's very frustrating because I keep saying to them every three months, you are not a bank. And why are you taking more money that your company is going to make interest on when you're not a bank and you have no right to do that? And we're always in credit. An energy company, I'm guessing, would say to this, well, we're acting to help you avoid getting into debt.

So they're trying to help you, the customer, aren't they? I would imagine that there are many customers for whom that's absolutely true and very helpful. But in our particular case, their argument is that it's the averaging out of our electricity meter.

readings that tells them that we have to pay more. And I've said to them, well, that can't be possible. If you're actually looking at our meter readings, you will find, and I even do the calculation, they keep having to go to a supervisor. So what I've figured out is I... wonder whether the averaging that they're talking about is not based on an individual home, but that it might be based on many homes within the same region.

What I'd like to see happen is every three months when I phone up and say, please do not raise our direct debit, I would like them to just automatically, when they look on their screen, say, no problem. we'll keep it at the same thing instead of me having to take sometimes more than half an hour out of my day trying to convince the person on the end of the phone to just do as I ask. So you just feel you're going round and round in circles four times a year? Yep.

Absolutely. And what they've told me most recently, when it was now three times they had to go back and forth to the supervisor within the same phone call, I think they got tired of me and they said, okay, this is the last time we'll do it, but next time we'll have to put it up. And I said, well, we'll see about it. that. Pema from Suffolk, I feel you can really tell that she's a Moneybox Live listener.

Eleanor Taylor, it is quite usual, isn't it, for customers who pay their bills by direct debit to have those payments evened out over the year, a process that's known as smoothing. But most other bills don't work that way. You're just asked to pay what you owe when you owe it. So why do energy companies do it differently?

Well, there's a benefit both for the consumers in certainty over what their payments will be, because over a typical winter, unlike in Pema's case where she's saying her consumption stays the same throughout the year, for most households, you would use more energy in the winter for heating your home and then use less.

in the summer but to avoid asking for customers to pay significantly more just in those winter months and then a lot less in the summer suppliers tend to even out across the year and it helps with budgeting and consistency to know what's coming out of your account each month. Is Pema right that they are perhaps not looking at her individual circumstances? I mean, how do they calculate what the smooth monthly payment should be?

Well, typically in a case where a customer has a smart meter like Pema does, you would expect that it can use the specific readings from her property. But this sounds like quite a complex case where there are then issues and concerns over the accuracy of that reading and how that might be informing.

what her annual consumption would be. So I'd say this is a bit more of an abnormal case, I think, of questions where the customer doesn't trust the information the supplier is giving them. And it's perhaps... more of a regional average rather than just for her property. So I think as much as she can do to prove the accuracy of her readings and the numbers she is submitting versus what she's seeing on the bill that the supplier is providing her might help with that.

Interesting. Energy UK told us that direct debits are set on individual circumstances and that the aim is to set it at a level where customers don't overpay by a lot or get in debt when prices are volatile. And there are smoothing options if you want to avoid direct debit, like moving to...

standard credit or prepayment. But Matthew, Citizens Advice has it received 60,000 complaints about energy billing in 2024. And we've been hearing many complaints, as we're talking to Dan about, about wrongful... backbilling on Moneybox. And this is a matter that regulators looking into, the energy secretary. So what confidence can you have that your bills are accurate?

It sounds really difficult. And, you know, listen to Payme's example there. There clearly isn't a lot of confidence in a provider. So I think what's really important is that you keep in touch with them. You keep checking to make sure that your bill is accurate, providing meter readings where you can. But like you say, with more and more people falling behind, more people being back billed, it is more difficult to have that trust in your supplier.

What can you do if you think you're overpaying? You think you're overpaying, I think it really depends on... why you believe you're overpaying in payment situation she has alternative you know energy source to you know to heat her home so in that situation you need to get in touch you need to make sure that you've had that conversation with your supplier and then really what's so important is that

That £20, £50, £100 a month that you overpay and buy, it could be a bill that she's unable to pay. So it's really important that you do have that conversation to make sure you're not falling behind elsewhere. Eleanor, we often hear of energy company profits.

But as we've been saying today, we know they're dealing with £3.8 billion worth of customer debt too. So how are they managing that? Are they simply passing it on to all customers? So I think there's been a lot of press about the amount of debt.

going up across the industry. So £3.8 billion is a huge figure and it shows this isn't just an issue for one energy supplier. It is an issue for all energy suppliers that they're facing. And effectively, these costs are not sustainable for them to be holding. a couple of years ago, a billion pounds of debt across the industry as effectively a norm. This is now a new norm that is three times, four times that.

It's not sustainable for them as businesses to keep carrying that cost. So ultimately, yes, those costs are being passed back to consumers indirectly. And there is accounting for it within the price cap that we're paying now. Really, those costs are being faced by all of us. And that is why those households, that one in five who are in debt, is actually an issue for everyone because we are all paying the costs of that.

OK, so, well, we've been talking about how energy companies are managing their costs or struggling to. But how about how can you bring yours down? If you're anything like me. price of energy is absolutely at the forefront of your mind whenever you turn up the thermostat or run the hot water. And our reporter Catherine Lund's been talking to people in Manchester about how they've been trying to keep their bills under control.

I've just been doing exactly the same as we always do, but I have just changed electricity company to a cheaper tariff. How much did you save doing that, do you know? About £120. A month? Yes. A month? You were on an extortionate. I was on an extortionate. I was discussing with the ladies and I told them what I was paying and they all went, what?

So I went home and changed. Have you two done anything to adapt? Are you maybe a bit more careful with energy use? Have you looked for other tariffs? Maybe don't put the heating on as much. If I'm freezing, I'll pull it. It'll go on, but I'll, you know, sit there in my little granny blanket for a bit longer, maybe. But I don't really do anything else, no. We have it set to a lower temperature now. The thermostat? Yeah, not massively lower, but just a couple of degrees lower.

Like you said, put a jumper on if you get a bit cold before you then would put the heat in. Would you have done that a couple of years ago? Probably not. No, probably not. I've never thought about it before. So we're a little bit mindful of what we use and when we use it. However, if we're cold, we will put the heating on and we do try and make sure that we're all nice and warm. We also do use a fire, so we've got a wood burner as well.

that we use so we can keep the central heating off when we've got that going. At the end of the day if you're cold you want to put the heating on and I do tend to work at home a lot more so obviously maybe throughout the course of the day if I feel cold I'll put the heating on and just...

Take it from there, really. Are you just kind of hoping for the best when it comes to the bill? I'm hoping the fact that we've signed up to a new tariff that hopefully it may not be as high as it was last year. I am mindful that everybody's doing the best to try and conserve energy and using energy efficient light bulbs and everything.

Everything's energy efficient, but the bills are still going up. And I just don't know how we're supposed to reduce our bills when you do everything and they still go up. Matthew, we heard there a lady saying that she'd saved £120 a month just by switching suppliers. Like, wow. So is switching provider one of the best things you can do to reduce bills? Firstly, that's really impressive. £120 a month is a lot of money.

I think that shows the importance of understanding your bill, understanding the tariff that you're on and seeing if you can switch because that is one of the main ways to save money. Now I think on top of that, you know, there is additional things you can do. I'm a big fan of the electric blanket. So just finding ways that you can...

cut costs down, keep yourself warm without spending as much money. Yes, I've got very familiar with blankets over the last couple of years and keeping the thermostat down, the energy saving trust that if you have a single room thermostat for the whole...

house for every degree you increase the temperature it will increase the heating bill by about 10% so worth taking it down a little bit. It can make a bit of a difference but Eleanor as so many of us find really no matter what you do your bill is going to be high isn't it?

Yeah, I think that the fact of the matter is that the energy bills, even though they're not as high as they were two years ago, they are still on the increase again. And as you mentioned at the start, the price cap is forecast to increase again from April. So to some extent, some of those...

tactics that we've just heard about are actually just to try and keep the costs for the next 12 months what they might have been for the last 12 months even if your consumption stays the same the actual amount you pay could still increase yeah

And Matthew B has emailed to say, please don't leave prepayment customers out of the conversation when talking about energy debt. We're usually on low pay, get disconnected if we can't afford to top up and still get saddled with daily standing charges. what are the options if you're on a prepayment meter in terms of extra help? We speak to so many people in terms of...

people that are on prepayment meters due to being on that low income and a lot of them just don't know what's available for them. They think that, simply put, they can't heat the home because they can't afford to top up the meter. What I would say is there's a lot of options in terms of emergency payments that can be made and although they do need...

to be repaid it can make sure you've got that heating on especially when you need it now if you do have sort of vulnerabilities young children or disabilities there is additional schemes a priority services register that you can sign for just to make sure you've got those extra protections What about for those with bills to pay? There's the winter fuel payment, which is now means tested. Is there...

Is that extra help available also for households which aren't on a prepay meter but nonetheless are struggling with their bills? Absolutely. So the winter fuel payment is still available to some. And I think one thing we've seen for a lot of our customers is the grants that are available.

Most energy providers have their own trust funds. They have the We Buy, sorry, You Pay, We Pay schemes. So there is lots of help in terms of ways to actually get that bill down or get those areas reduced. But I think a wider point is the amount of benefits.

in general that aren't being claimed that people are entitled to so you know as part of our debt advice process we would always look at additional benefits to boost people's income that can be the difference between you paying essentially the money that you can you can gain could pay your full bill each month And if someone is behind with their gas and electricity bills, what one piece of advice would you give them? What should they do now?

please don't leave it too late to get the help that you need. With debt advice, it can sometimes take a year before people actually reach out and get that support. So my one piece of advice would be pick up the phone, reach out to us, and we'll find out the best way to tackle your arrears. Thank you very much. Well, you've also been getting in touch with us. Ruth emailed to say,

10% of my income on energy. Eleanor, does that sound about right for people typically? Is that how much energy, like as a proportion of income, people will be spending? Well, that does sound high. And I think Ruth's situation is exactly the type that we were talking about earlier on of this group of households who've really struggled to keep up with the increased cost of living. So it's not just energy prices that have been increasing. You know, rent has been going up.

and basics probably now being put on credit cards to make ends meet. So I think actually it's a really difficult situation that we find ourselves in that households have so little disposable income now left just for the basics. And Carol says, I have no debt, but I do fix. But I find it confusing and frustrating. She says, I pay for exactly what I use. My last year's usage was £442 because I'm mean.

Well, that is actually very impressive because, as we were saying, average bills are going to be, in April, around about £1,800. So you're doing very well indeed there. Sue says, my energy company let me pay every month exactly what I use.

and I find it works much better that way. Helen says I have oil-fired central heating and cooking and my electricity usage does not vary much over the year. My energy supplier attempts to increase my direct debit over the winter but usually backs down when I first. Again, you can always tell a Moneybox listener, can't you?

Well, that's all we have time for in today's podcast. My thanks to debt advisor Matthew Sheeran and energy specialist Eleanor Taylor. Thanks also to you for sharing your experiences. Next week, Felicity Hanna will be back in the presenter's chair. And as ever, if you have a story you'd like to share, please email moneybox at bbc.co.uk. You can also send a voice note or comment to Moneybox via WhatsApp. Our number is 033 06783.

And be assured, we do look at every email and message you send through. In this podcast, the producers were Catherine Lund and Neil Morrow. Reporter Dan Whitworth. Output producer Sarah Rogers. Studio manager Sam Biddle. Our editor is Jess Quayle. I'm Ruth Alexander and this was a BBC News Money and Work production for BBC Sounds. I'm Nicola Coughlin and for BBC Radio 4, this is history's youngest heroes. Rebellion.

risk and the radical power of youth. She thought, right, I'll just do it. She thought about others rather than herself. 12 stories of extraordinary young people from across history. There's a real sense of urgency in them. That resistance has to be mounted, it has to be mounted now. Subscribe to History's Youngest Heroes on BBC Sounds.

When Vivint Smart Security gives you a smarter way to protect and its smart thermostats give you a smarter way to save, well, that's a smarter way to live. Get the smarter home system that just gets you at Vivint.com. Make money predicting football. Now you can. Now in Texas with Calci. Calci is the only platform that lets you legally trade on real world events in all 50 states from football to Bitcoin, the Oscars and even politics. If it matters, you can trade on.

Trade on who wins each game, props, spread, and more. Legally, now in Texas. Don't miss your shot. Download the Kalshi app or go to Kalshi.com. Use code PODCAST and get $10 when you trade on. This is an investment that carries risk.