Energy providers are set to be banned from charging customers for gas and electricity used more than 12 months ago, under new rules proposed by Ofgem.
This would mean if a customer has been paying an incorrect amount for their energy, a provider won’t be able to bill them for anything they owe from a year ago.
The new back-billing code will replace the current voluntary agreement which was created in 2007, the energy regulator says.
Firms signed a voluntary back billing agreement in 2007 when there were 11 on the market
The problem of back billing often arises when estimated bills are being used.
As these bills are estimated, often they are incorrect and when an actual meter reading is given, it may be the case that the customer has been paying too little or too much.
If they’re paying too little, providers can charge them for the extra energy used but they should only do this for up to 12 months previously, according to the current agreement from Ofgem.
In 2007 the 11 energy providers on the market signed this voluntary agreement. But there are now more than 50 energy providers and there is little consistency when it comes to back billing.
Ofgem says it is concerned that the voluntary principle is not being applied consistently and not all suppliers have a back-billing system in place to protect consumers.
It has launched a project to look into the current system. It will look at the types of consumers that need back billing protection, whether it is possible for different time limits on back billing to exist and the level of detail a new obligation on back billing would need.
BACK BILLING POLICES FOR DOMESTIC ENERGY PROVIDERS
Provider Is there a back bill policy for smart meters ?Is smart meter policy different from the standard? Limit for consumers with smart meters Affect Energy NoN/A Use a case-by-case approach to back-billing but will work within industry standard Axis No N/A 12 months Better Energy No N/A No smart meters in place yet but anticipate using a 6 month limit Bristol Energy Yes No 12 months – will use a case-by-case approach British Gas Yes No 12 months Bulb No No 6 months Co-op Energy No No 12 months E No N/A N/A E.ON Yes No 12 Months Economy Energy Yes No 6 months Ecotricity Yes No 9 months EDF Energy Yes No 12 months Extra Energy No N/A Not yet formalised First Utility Yes No 12 months Flow Energy Yes No 12 months Future Energy No N/A Will use a case-by-case approach but unlikely to go beyond 6 months for traditional metering Go Effortless Energy No Yes 6 months LoCO2 Energy No No 12 months Npower Yes No 12 months Octopus Energy Yes No 12 months Our Power Yes No 6 months Ovo Energy Yes No 12 months People For Places Energy No N/A No smart meters in place yet – policies in development Robin Hood Energy No No 12 months Scottish Power Yes No 12 months Spark Energy Yes No 12 months SSE Yes No 12 months Utilita Yes No 12 months Utility Warehouse Yes No 12 months Zog Energy No N/A N/A Source: Ofgem
The limit of 12 months may also be changed with the introduction of smart meters.
As smart meters provide up-to-date meter readings they should eradicate the system of estimated bills and therefore Ofgem says the 12-month back billing window may need to be reduced.
Rachel Fletcher, senior partner at Ofgem, said: ‘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.
‘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.’
Ofgem has written an open letter detailing its proposals and is asking for responses to be sent in by 28 April.
Gillian Guy, chief executive of Citizens Advice, said: ‘Shock gas and electricity bills can throw people’s finances into disarray.
‘Often through no fault of their own, people are being hit with large back bills costing hundreds or even thousands of pounds.
‘We’ve long been calling on the regulator to introduce a mandatory time limit for back bills instead of relying on voluntary action – which suppliers have refused to apply in some cases – so we’re really pleased to see Ofgem take this action today.
‘The regulator is also right to look at a shorter time limit of 6 months for smart meter back bills. Given that smart meters are supposed to provide an accurate bill first time, we’d like to see this back bill limit eventually reduced to 3 months.’