Energy providers are to be prohibited from back-billing customers for gas and electricity they used more than 12 months ago, according to the energy regulator Ofgem.
The new rule will come into effect in May and will prevent customers receiving unexpected bills that can amount to thousands of pounds.
Victoria MacGregor, director of energy at Citizens Advice, welcomed the news, saying: “We have long called for the changes announced today. The new rules will deliver better protections for households and small businesses across the country. No-one should face a massive unforeseen bill that goes back years when it is their supplier that is at fault.
“Previously we’ve seen evidence of suppliers trying to game the rules by blaming customers for billing errors, cases where suppliers have ignored their commitments entirely, and small businesses receiving unexpected bills running to tens of thousands of pounds.”
Most suppliers have already signed up to a voluntary agreement preventing them from back-billing customers for energy used more than 12 months prior, but Ofgem has now made this a compulsory rule for all energy firms. The problem stems from energy companies working out a customer’s bill based on estimated readings which do not always reflect the actual energy used. Suppliers will still be able reclaim money from a customer beyond the 12 months if the consumer has been found to be purposefully misleading their supplier with regard to how much energy they have used.
Ofgem’s senior partner for consumers and competition Rob Salter-Church said: “Large catch-up bills can leave consumers struggling financially or even in debt to their supplier.
“Getting billing right is an essential part of customer service and it’s unfair that consumers should be left out of pocket when through no fault of their own they’re issued with a shock bill from their supplier.”
According to Ofgem, the typical back-bill comes to £1,160 and, in some cases, customers have been billed for over £10,000. As the bills are unexpected, many consumers are unable to pay them, and are left indebted to their energy company. Ofgem received 10,000 complaints about back-bills in 2017 alone. The problem of catch up bills is expected to subside altogether when the smart meter rollout is completed, since smart meters provide energy firms up to date information on energy usage, in theory eliminating estimates. The new rule on catch up bills comes into effect in May for residential accounts and small businesses will be included in November.
Lawrence Slade, chief executive of Energy UK, a trade association for the UK energy industry commented saying, “Energy companies take accurate billing very seriously and where there are problems, the majority are resolved within 24 hours.
“Suppliers are actively working to improve billing for their customers. That is why companies covering 80% of the market have signed up to the Energy UK Billing Code to ensure greater accuracy of bills. Audit results of the code show year-on-year improvement and complaint numbers are falling.”