Ofgem to ban energy retailers from back-billing beyond 12 months

Customers facing mammoth energy bills when changing suppliers or moving homes could soon face reprieve, if new plans from Ofgem go ahead.

The energy industry regulator said back-bills primarily resulted from suppliers using estimated bills until they take an actual meter reading, which could show that the customer’s consumption was higher than expected.

Suppliers then send a ‘catch-up’ bill to recover the difference, with Ofgem claiming that sometimes that could result in “large amounts” being owed.

Energy suppliers signed up to a voluntary commitment not to back-bill domestic customers for energy used more than 12 months previously, if the supplier was at fault, in 2007.

Since then, however, the energy supply market had expanded from 11 suppliers to more than 50.

Ofgem said it was now concerned, in part due to receiving case studies from Citizens Advice, that the voluntary principle was not being applied consistently and that not all suppliers had appropriate back-billing protections in place.

“Getting billing right is an essential part of customer service, but when things go wrong we want to ensure that all customers benefit from the same protection against back-billing,” said Ofgem senior partner Rachel Fletcher.

“We cannot be certain that this is the case now under the voluntary commitment.

“We expect suppliers to put their customers first, which is why we are proposing a new enforceable rule to provide this protection.”

The regulator said it was also considering whether to introduce a shorter time limit on suppliers back-billing customers as smart meters are rolled out.

Smart meters enabled suppliers to remotely obtain actual meter readings - rather than estimates - which Ofgem said should allow them to reduce the length of time they need to back-bill customers.

Stakeholders would be able to comment on detailed proposals that would be published over the summer, with Ofgem saying it expects the new rule to go live in the coming winter.