Energy consumers could save around £1,000 as a result of Ofgem’s decision to ban back-billing for energy that was used beyond the last 12 months.
The ban comes after a lack of compliance from many energy providers with a voluntary agreement that is already in place, promising to protect customers from back-billing a long time in the future. Many of the smaller firms were not part of this agreement, but now must abide by the new Ofgem rules.
As of May this year, domestic consumers will be protected by the ban, with microbusinesses having to wait until November for the same rule to come into effect.
Back in 2016, 2.1 million households were said to have suffered from shock bills as a result of back-billing from providers. The average was said to be just £206. Whereas two years on, Citizens Advice claim that that average has risen to over £1,000.
This suggests that this has become an increasingly alarming problem, and Ofgem’s intervention seems to have come at a welcoming time. The news comes just a week after the industry regulator acquired more power to cap the prices of energy providers’ standard variable tariffs.
What is back-billing?
Back-billing is the process of energy suppliers charging customers excess fees. This will come after energy usage exceeds the amount that providers estimate, subsequently meaning households do not pay for the full allocation of energy that they have used. As a result, providers send additional bills later on to account for the deficit, meaning some households get lumped with huge sums to pay in one go for a bill that was dated months before.
The ban will only to cover those who are transparent with their electricity meters. For instance, not allowing providers to take meter readings will mean they are within their rights to back-bill for energy used more than 12 months in the past.
With a mass introduction of smart meters in homes across the UK, estimated billing will become rarer. Back-billing as a result will eventually fade out, but in the meantime, this move by Ofgem goes a way to protecting those consumers from a hefty bill.
Ofgem’s Robert Salter-Church said; ‘It’s unfair that consumers should be left out of pocket when they’re issued with a shock bill from their supplier.
‘So we’re taking action and banning suppliers from issuing back-bills from beyond 12 months.
‘This sends a strong message to suppliers to improve the accuracy the bills they send to their customers.’
How to avoid receiving huge energy bills
Do you want to avoid receiving these retrospective lump sums from energy providers? Well you can. If you get in touch with your energy provider, you can request for them to fit a smart meter in your property. A smart meter sends readings to your supplier automatically, meaning they will never need to estimate your energy usage and thus there will not be any nasty surprises when it comes to bills in the future.
They will almost always be installed free of charge, and it will usually take around six weeks for smart meters to be fitted in your home from when you speak to your provider.