Following the announcement from Ofgem today, Somerset Chamber of Commerce welcomes the formalisation of the backbilling process and the ban for periods over 12 months.
Previously a voluntary agreement by the major suppliers, the new guidelines now apply across all providers as well as ensuring that those who signed the voluntary agreement comply with the ban.
Head of Chamber Services – Alistair Tudor commented, “This is a welcome formalisation of the backbilling process meaning fewer businesses will be caught out by historic energy bills. It places the emphasis squarely with the energy supplier to provide accurate billing instead of relying on estimations. Whilst this is a step in the right direction for consumers and small businesses, we would encourage Ofgem to include larger businesses in the regulation in the near future.”
Maria O’Sullivan, Somerset Chamber Member and Managing Director of costgard ltd said “It is good news that Ofgem have finally banned energy suppliers from back-billing for gas and electricity used more than 12 months earlier. Some suppliers have adopted the 12 month rule voluntarily for several years. However, this Ofgem ruling is only for domestic users from May and the smallest businesses from November. We don’t know yet what the definition of ‘smallest businesses’ is but we feel that it should be applied to all businesses. We have seen how this can put enormous strain on business’s cashflow when the supplier has been at fault for reasons such as long-term estimated readings or even losing sight of a meter and not billing at all.”
The full Ofgem press release follows :
- Ofgem is banning suppliers from backbilling customers for energy used more than 12 months ago.
- These ‘shock bills’, which are typically £1,160, can leave customers struggling financially or even in debt
- The existing voluntary agreement for suppliers not to backbill past 12 months does not protect all consumers from receiving these bills
Ofgem is banning suppliers from issuing customers with backbills for energy used more than 12 months ago.
Backbills can result from problems with a supplier’s billing system, or from suppliers estimating bills until they have an actual meter reading which may show that the customer’s consumption is higher than expected. Suppliers then send a ‘catch-up’ bill to recover the difference.
The typical backbill is £1,160, but they can be much higher, leaving customers struggling financially or even in debt and causing stress.
Many suppliers have signed up to, or follow, a voluntary agreement not to backbill customers past 12 months. However, the voluntary agreement does not cover all suppliers, and those that have signed up do not always follow this agreement.
Ofgem, which consulted on this issue last year, has decided to ban all domestic and microbusiness suppliers from issuing backbills for energy used more than 12 months ago. The exception is where consumers actively prevent suppliers from taking or receiving accurate meter readings, for example by tampering with or obstructing access to the meter.
As smart meters are rolled out across the UK, suppliers will no longer need to rely on estimated bills and send catch-up bills to customers. Suppliers have obligations to make sure they use the technology, once smart meters are installed, to improve services for customers for example by providing accurate billing.
The new rule on backbilling will come into effect at the beginning of May for domestic consumers and in November for microbusinesses.
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 backbills 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.”