Australia’s energy sector is grappling with a mounting crisis as unpaid household power bills hit record levels, sparking fears that paying customers will be forced to cover the shortfall.

Financial counsellors estimate that 2.5 million Australians are living under severe financial stress, with a growing number simply unable – or unwilling – to keep up with surging electricity costs.

Unlike in past decades, when non-payment often led to disconnections, power companies are now quietly allowing supply to continue in most cases.

The issue comes as electricity prices rose 13% in the most recent CPI figures, partly due to higher generation and transmission costs, but also potentially reflecting collection shortfalls.

With mortgage pressures and cost-of-living pain biting, advisers are warning clients against using credit cards to cover energy bills – leaving providers to absorb mounting losses.

Industry insiders admit the situation is “unsustainable”.

As business columnist Robert Gottliebsen put it, “as it becomes known that in financially stressed situations debts are not being pursued with vigour, it will multiply the problem and force it to be addressed.”

The pricing pain is compounded by growing anger at energy retailers.

This week, global energy giant ENGIE admitted to misleading a South Australian customer by falsely claiming the government sets electricity prices.

After complaints were escalated to the Energy and Water Ombudsman, the company apologised and retrained staff.

South Australia’s Energy Minister Tom Koutsantonis referred the matter to the ACCC, branding the behaviour “deceptive and misleading”.

Meanwhile, debate continues over Australia’s long-term energy strategy.

Critics argue ballooning costs for renewable transmission projects have made electricity even more expensive, while others say the real savings lie elsewhere.

A July report from the Institute for Energy Economics and Financial Analysis found households could slash bills by up to 90% by improving efficiency, installing rooftop solar, and adding batteries.

Energy experts are urging governments to pivot towards home upgrades – such as better insulation, heat pumps and induction cooktops – which could save families thousands each year and ease pressure on the grid.

For now, though, households are caught between soaring costs, industry missteps, and a system struggling to balance social hardship with financial sustainability.

With disconnections rare, unpaid debts rising, and regulators circling, the nation’s energy affordability crisis shows no sign of easing.