You might receive a back-bill from your gas or electricity supplier if they haven't charged you correctly for your energy use. This is not uncommon. According to Citizens Advice, as many as 2.1 million people a year receive a catch-up bill, at an average cost of £206.
Regulator Ofgem is now proposing a ban on energy firms charging catch-up bills for gas and electricity used more than 12 months earlier. We explain what these proposed plans could mean for you and your budget.
In 2007, energy suppliers signed a voluntary agreement not to back-bill customers for energy used more than 12 months ago, if the supplier was at fault.
Most suppliers agreed to this, however there were only a small number of them at the time. There's now over 50 gas or electricity suppliers, leading to concerns that some suppliers are not keeping to this agreement.
Ofgem wants to introduce a new enforceable rule to stop suppliers seeking payments for unbilled energy used more than 12 months ago. The regulator will put together a proposal over the summer, with the expectation to introduce the new rule by this winter.
In addition, Ofgem is also considering whether to introduce shorter time limits on back-billing as the smart meter roll-out continues. The Government has asked energy suppliers to roll out smart meters to all homes in the UK by 2020.
When does back-billing happen?
Back-billing occurs when suppliers estimate how much energy your household uses instead of using an accurate meter reading. As a result, your energy supplier could overcharge or underestimate your bill.
If your supplier underestimates what you owe, they'll adjust the usage once they receive a meter reading and your next bill could jump up to pay for the unpaid energy. System failures from suppliers can also be the cause for a catch-up bill as you can receive a large bill once the error is spotted.
What does this proposal mean for me?
This proposal by Ofgem could help to increase the accuracy of bills and give all energy customers the same protection against back-billing.
It's important to remember though, that you can still receive a back-bill for energy used under the 12 month limit. However, the restrictions on the length of time should put a cap on the amount of money you're charged.
You could have less to worry about if you have a smart meter, as under these new plans, you'll only receive a back-bill for three months' energy use. You'll be able to monitor how much gas and electricity you're using with a smart meter as well. This could help you cut back and save money on your bills.
You can find out if you have to have a smart meter in our blog.