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.
The ban will start in May for domestic customers and in November for the smallest businesses. The only exception is when customers have purposefully prevented the company from taking a reading.
Many suppliers had 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.
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.
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.”
Welcoming the ban, Craig Salter from Citizens Advice Scotland’s Consumer Futures Unit, said: “Consumers should not be penalised for billing mistakes that are the fault of their supplier, so this is a welcome move from Ofgem.
“Billing and metering problems are one of the most prevalent energy issues reported across the Citizens Advice Service in Scotland, and unexpected bills can make it very difficult for consumers to make ends meet.
“We hope that this will lead to better billing practices from suppliers.”