Suppliers will not be allowed to back-bill customers for energy used more than 12 months ago under new proposals from Ofgem, expected to come into force later this year.

Ofgem has written to energy suppliers to announce its intention to launch a project to protect consumers from back billing. The regulator said it’s minded to introduce new licence obligations to strengthen consumer protections in this area

Back-bills mainly result from suppliers using estimated bills until they take 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, which can sometimes this can result in large amounts being owed.

In 2007 energy suppliers signed up to a voluntary commitment not to back-bill domestic customers for energy used more than 12 months previously, if the supplier is at fault. Since then, the energy supply market has expanded from 11 suppliers to over 50 currently.

Ofgem said it 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.

Rachel Fletcher, a senior partner at Ofgem said: “Getting billing right is an essential part of customer service, but when things go wrong we want to ensure that all customers benefit from the same protection against back-billing. We cannot be certain that this is the case now under the voluntary commitment. We expect suppliers to put their customers first, which is why we are proposing a new enforceable rule to provide this protection.”

Ofgem is also considering whether to introduce a shorter time limit on suppliers back-billing customers as smart meters are rolled out. 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.

Ofgem will publish detailed proposals for consultation this summer. Ofgem expects the new rule to go live this winter.

Click here to see Ofgem’s letter on back-billing. The letter also contains information on the current back-billing policies of energy suppliers for smart meters.

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