Ofgem Bans Back-Billing on Energy Bills Older Than 12 Months

For many householders, energy bills are one of the most costly outgoings on their budgets. We look at Ofgem back billing policy and what is does.

In these times of financial insecurity, every penny counts. Have you ever had an energy bill that was higher than you’d budgeted for? If so, you’ll know how difficult it can be to juggle your financial commitments afterwards.

In this article, Quick Loans Express a short term loans lender, explain what backbilling on energy bills are and what the latest Ofgem backbilling rule is. Are there exceptions to this new rule and when did it come into effect? We also advise you on what to do if you receive a back-up bill before May and whether smart meters will improve the accuracy of customer billing.

What is Backbilling?

Backbilling is when your electricity or gas supplier ‘back-bills’ you for energy use because of errors in the original billing. These arrears are usually because the supplier miscalculates energy usage. Since they haven’t been able to read the meter, the bill is often based on an estimate of the customer’s usage. This particularly happens when consumers pay by direct debit. Once they read the meter, they’re able to charge customers correctly. In other cases, the back-dating of energy usage is due to errors in the suppliers’ billing systems.

Ofgem Backbilling

There has been a voluntary agreement in place since 2007 for energy suppliers not to charge customers for catch-up bills which are older than a year. However, some energy providers aren’t fully compliant with this suggested guideline for good business practice, and some smaller firms haven’t signed up to it.

The Office of Gas and Electricity Market, or Ofgem, has said that accurate billing is an essential part of customer services. Unfortunately, it says that it receives around 10,000 complaints a year regarding these back-dated bills. In their research, the energy regulator found that a typical back-bill is £1,160 and its median length is 24 months. Their worry is that such bills can lead to stress and in some cases, customers find themselves taking out loans to pay it off which can lead to debt.

For a long time, debt advisory agencies have been critical of the back-dating of bills. Victoria MacGregor, director of energy at Citizens Advice said,

“No one should face a massive unforeseen bill that goes back years when it is their supplier that is at fault.”

What’s Ofgem’s New Ruling about Back-dated Bills?

In May 2018, energy suppliers were no longer allowed to ask for arrears which go back further than 12 months. The initial ruling concerns domestic residences only, but from November 2018, the rule applies to small businesses.

The only exception is when customers have deliberately prevented the reading of the meter. For example, they’ve obstructed access to it.

What to do if you think your supplier is breaking the rules?

If you receive a catch-up bill older than 12 months, you’re well within your rights to question it. The best thing to do is to follow your suppliers complaints procedure. Lawrence Slade, the Chief Executive of Energy UK, has said that the majority of such queries are resolved within 24 hours and that 80% of the industry have signed up to the Energy UK Billing Code.

If you feel that your complaint about billing isn’t dealt with appropriately, you can take the case further and complain to the Energy Ombudsman. They work independently to handle such disputes.

Will Smart Meters Make a Difference?

After an Ofgem consultation in November 2017, the full roll-out of smart meters was given a 2020 deadline. These meters will allow consumers to manage their energy usage and if necessary, make savings. The other benefit for customers is that billing will be accurate and there will no longer be a need for catch-up bills.

Smart meters aren’t compulsory, however. There are also doubts in the industry about whether energy suppliers will be able to fit 53 million smart meters in 30 million premises before the deadline.

Conclusion

We’ve seen again and again that when an industry refuses to abide by good business practice guidelines, then the regulator has to step in. This latest ruling will make a huge difference to the lives of many consumers. They shouldn’t have to pay back-dated energy bills when it isn’t their fault. A bill of over £1,000 can push many over the edge between scraping by and falling into debt and may result in you taking a payday direct loan. This will no longer happen thanks to Ofgem.