Energy suppliers won't be able to claw back cash from customers for energy used more than 12 months ago under new proposals by Ofgem to rein in 'back-billing'.
The proposals are designed to prevent 'catch-up' bills that typically result from suppliers estimating energy use until they take an actual meter reading, which may show higher than expected consumption.
Since 2007, there has been a voluntary commitment not to back-bill domestic customers for energy used more than 12 months previously if the supplier is at fault. However, the regulator has concerns that this is not being applied consistently, and that not all suppliers have appropriate back-billing protections in place.
In addition, Ofgem will consider introducing shorter time limits on suppliers back-billing customers as the smart meter roll-out progresses. As smart meters allow suppliers to automatically receive actual readings (rather than relying on estimates), this should reduce the time needed to back-bill customers.
Ofgem will put forward detailed proposals over the summer, with a view to introducing the new rule this coming winter.
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Your supplier shouldn't be chasing you for unbilled energy used more than 12 months ago
Under the voluntary 'back-billing principle', suppliers should not seek additional payments for unbilled energy used more than 12 months before an error was detected and a correct bill was sent out – if the supplier is at fault.
Currently, each back-billing case is looked at individually, but generally it will apply if your supplier has:
- Failed to bill you at all and you've requested bills for your energy.
- Billed you using estimated meter readings instead of actual readings provided by you or a meter reader.
- Billed you incorrectly by mixing up meter readings – and failing to act once you've notified it about the error.
- Failed to act about a query or fault on your account or meter and allowed large debt to build up.
- Not reviewed your payment method within 15 months, or hasn't reviewed it based on a reasonable estimate.
MSE has campaigned on the issue of back-billing
MoneySavingExpert.com and its founder Martin Lewis have previously campaigned to help Npower customers stung by late and inaccurate bills, after a raft of customers faced demands of £100s months after settling their final bill and switching away from the firm.
At the time, Npower wouldn't budge from its back-billing policy, where it only wrote off charges when forced to by the back-billing principle.
After discussions with Martin over what would be an acceptable solution, Npower agreed to be much more lenient with former and existing customers.
Should the Ofgem proposals go ahead, protection against back-billing would be strengthened as the regulator's preferred approach is to introduce a new obligation in suppliers' licences to supply gas and electricity.
What does Ofgem say?
An Ofgem spokesperson 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."