Ofgem expects that by this winter, its new proposals to limit the effects of back-billing will be in place: “suppliers will not be allowed to back-bill customers for energy used more than 12 months ago“.
Concern over current voluntary restrictions
Restrictions that are currently in place work on an opt-in basis, meaning only the suppliers who decide to adhere to a 12 month back-billing limit are doing so — usually larger suppliers.
When the voluntary limit was rolled out in 2007, most suppliers acknowledged the limit in cases where they were at fault, however back then there were only 11 suppliers.
Now with over 50 gas or electricity suppliers in the market, the regulator is becoming anxious:
“Ofgem is now concerned, in part due to receiving case studies from Citizens Advice, that the voluntary principle is not being applied consistently and that not all suppliers have appropriate back-billing protections in place.”
It seems something more substantial has to be done to fully protect consumers from large unexpected bills.
Emma Bush, energy expert at uSwitch, says:
“Putting an end to back-billing on energy used more than a year ago will help protect consumers and encourage suppliers to do more to ensure bills are accurate in the first place.
We would also encourage consumers to do their part by submitting meter readings every three months.”
When does back-billing occur?
Back-billing can happen when suppliers estimate a household’s usage to create its bill: without an accurate meter reading to calculate usage, the supplier is unable to know exactly how much a consumer has used — so could be drastically over / underestimating for months or even years.
In the case of underestimating, when a meter read finally comes in (from the consumer or the supplier) the usage is adjusted, and the next bill could sky rocket to catch up for all the unpaid gas or electricity.
On occasion, system failures from suppliers can also be to blame for a catch-up bill: when the error comes to light (which could be a long way down the line), a large bill can be issued.
Additionally, a consumer may have requested a bill from their supplier on a number of occasions and never received one, yet are still liable to pay for their increasing usage when a bill is finally created.
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Further limits for smart meters
Ofgem has also announced they will look into whether the back-billing for smart meters should be even shorter.
The accuracy of bills is pitched as an advantage of smart meters, so they should ensure that consumers and suppliers are both aware of exactly how much electricity and gas a home with a smart meter has used, putting an end to the problematic estimated bill.
Ofgem summarises: “smart meters enable suppliers to remotely obtain actual, rather than estimated meter readings, which should allow them to reduce the length of time they need to back-bill these customers.”