Energy customers owing their suppliers could soon find their liabilities limited to 12 months following a ban issued by regulator Ofgem.
Backbills can result from problems with a supplier’s billing system, or from suppliers estimating bills until they have an actual meter reading which may show that the customer’s consumption is higher than expected. Suppliers then send a ‘catch-up’ bill to recover the difference.
According to Ofgem, the typical backbill is in the region of £1,160. However, they can be much higher, leaving customers struggling financially and often falling into debt.
Many suppliers have signed up to a voluntary agreement not to backbill customers past 12 months. However, the voluntary agreement does not cover all suppliers, and those that have signed up do not always follow this agreement.
As such, Ofgem has decided to ban all domestic and microbusiness suppliers from issuing backbills for energy used more than 12 months ago. The exception is where consumers actively prevent suppliers from taking or receiving accurate meter readings, for example by tampering with or obstructing access to the meter.
The regulator added that as smart meters are rolled out across the UK, suppliers will no longer need to rely on estimated bills and send catch-up bills to customers.
Suppliers have obligations to use the technology, once they are installed, to provide accurate billing.
The rule on backbilling will come into effect at the beginning of May for domestic consumers and in November for microbusinesses.
Rob Salter-Church, Ofgem’s interim senior partner for consumers and competition, 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.”
Victoria MacGregor, director of energy at Citizens Advice, said: “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’s their supplier that’s 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.”
Lawrence Slade, chief executive of Energy UK said: "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 percent 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.”