Ofgem has announced that is going to formally back-billing. Energy firms will be banned from charging catch-up bills for energy used more than 12 months earlier.

Customers who pay via direct debit often receive bills based on estimated meter readings. When an actual reading is taken, the supplier “back-bills” the customer for any shortfall.

A voluntary agreement to stop back-billing of more than 12 months had been in place among the biggest suppliers since 2007. However, some have not fully complied and smaller energy firms were not signed up.

The ban will come into effect in May.

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.”

Lawrence Slade, chief executive of Energy UK said “Energy companies take accurate billing very seriously and where there are problems, the majority are resolved within 24 hours. Suppliers are actively working to improve billing for their customers. That is why companies covering 80 per cent of the market have signed up to the Energy UK Billing Code to ensure greater accuracy of bills. Audit results of the code show year-on-year improvement and complaint numbers are falling.”

“There are now over 8 million smart meters in UK homes and businesses bringing many benefits including an end to estimated billing, helping consumers understand exactly what they are spending in pounds and pence, in near real-time.

Commenting on the decision Victoria MacGregor, Director of Energy at Citizens Advice, said “We have long called for the changes announced today. The new rules will deliver better protections for households and small businesses across the country. No-one should face a massive unforeseen bill that goes back years when it’s their supplier that’s at fault.”

“Previously we’ve seen evidence of suppliers trying to game the rules by blaming customers for billing errors, cases where suppliers have ignored their commitments entirely, and small businesses receiving unexpected bills running to tens of thousands of pounds.”

“However, we still believe that for smart meters the rules need to go further and that in time, the practice of back-billing should end completely. Energy customers have a right to expect accurate bills. Suppliers have not met their voluntary commitment to limit back-bills for smart meter users to 6 months. They should honour their commitment to smart meter users and implement this change now.”

 Peter Earl, Head of Energy, comparethemarket.com, said “The ban will give peace of mind for many households when it comes into force in early May. However, up until that point, there is a chance that we could see an avalanche of back billing from energy companies, as they try to recoup as much money as they can before the deadline. Given how confusing and error-prone bills can often be, there may be a lot of heated disputes between suppliers and households before May.”

“Bill payers should know that they are not alone. If you feel your energy company is not dealing with your billing complaint appropriately, you can take your case further and complain to the Energy Ombudsman, who will independently handle your dispute.”