Back-billing ban to apply to all energy firms

Energy regulator Ofgem has announced that from the end of April, no firm will be able to bill customers for energy used more than 12 months ago.

Six firms, including British Gas, E.on and EDF, already agree not to bill customers beyond 12 months as part of a voluntary scheme, but Ofgem says these companies don't always follow these rules and so it's putting in place a ban that will apply to the whole sector.

Back-billing usually happens when suppliers estimate bills as they don't have regular, accurate meter readings. Once they have the meter readings they may then send a catch-up bill if the estimated bill is too low.

The regulator says the typical back-bill is £1,160 but in extreme cases it has seen customers suddenly asked to pay more than £10,000.

Martin: 'A year is simply too long'

Martin Lewis, founder of MoneySavingExpert.com, said: "While it's never a bad thing to have existing practice turned into rules, this is not going to solve the problem for many families. It is absolutely outrageous that when people have left an energy firm, given a meter reading and paid what they believe is their final bill, they can nearly a year later suddenly get another bill for say, £1,000, kiboshing their budgeting and their family finances. A year is simply too long.

"We have a quarterly billing cycle, and we believe that the whole system of final bills especially needs to be improved. When you're told you've got a final bill, that should be a final bill.

"If it isn't, it should be called a 'provisional bill', and you must have your final bill within three months of leaving an energy provider. Waiting up to a year and giving people a false comfort that they're clear of their obligations – when in fact they are going to get a massive unexpected and illogical bill shock later – just isn't good enough."

What are the new rules?

No firm will be able to bill you for energy used more than 12 months ago.

British Gas (including Scottish Gas), E.on, EDF, Npower, Scottish Power and SSE already agree to do this as part of a Voluntary Code of Practice for Accurate Bills.

The only exception will be if a customer prevents an energy company from taking accurate meter readings, for example by refusing to allow it to take a reading.

What does Ofgem say?

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.

"So we're taking action and banning suppliers from issuing back-bills beyond 12 months, where it's not the customer's fault. This sends a strong message to suppliers to improve the accuracy of the bills they send to their customers."