Ofgem welcomes fresh commitments by energy suppliers to cut back-billing for Britain’s smallest firms

Press release
Publication date
Industry sector
Supply and Retail Market

Ofgem today welcomed further moves by leading energy suppliers to reduce the period in which they are able to ‘back-bill’ Britain’s smallest businesses.

This builds on steps already taken following Ofgem action and complements other steps taken by the regulator to give small businesses greater protection in the energy market.

The reforms include enforceable standards of conduct which require suppliers to treat businesses fairly. Ofgem has also extended existing safeguards so that from 31 March 2014, up to 160,000 more small businesses can get clear information on the key facts about their contracts.

And to give the smallest businesses more time to compare deals suppliers will have to provide them with better information. This includes a requirement for suppliers to put the contract end date on all bills for these firms by the end of March 2014.

Back billing happens when suppliers do not bill a customer for some time, only to later issue a bill for energy that has been used, but not previously billed. Ofgem took the lead in pushing suppliers to cut back-billing for Britain’s smallest businesses to one year, where the supplier is at fault.

As a result, Eon and SSE have already limited back-billing for Britain’s smallest businesses to one year. And we are pleased that, following the outcome of a working group set up by Government, British Gas, EDF Energy, Npower, Scottish Power, First Utility, Good Energy, and Opus have pledged to limit back billing to one year by the end of 2013, or as soon as is practicably possible in 2014.

Ofgem monitoring shows that suppliers have already been moving towards a one year limit with the majority of back-bills arising no more than three years from the issue date and less than £2,000 in value.*

Philip Cullum, Consumer Partner, Ofgem, said: “We want to give businesses more protection in the energy market. That’s why we have put in place reforms to ensure businesses get fair treatment from suppliers and clear information on when they can shop around for better deals.

“Small businesses have told us they’re worried about facing big energy bills out of the blue, and our latest data reveals that suppliers’ record on so-called ‘back-billing’ is poor but moving in the right direction.”

“Our reforms place a general duty on suppliers to treat smaller businesses fairly in a range of key areas, including back-billing. But we also wanted more specific commitments on limiting back-billing so we welcome the new arrangements announced today.”

Ofgem has also taken further steps to improve protection for businesses. Earlier this year the regulator made a case to Government for powers to clamp down on ‘rogue’ brokers and other organisations that are marketing energy products or services to business customers in a misleading way. Last month Government confirmed that Ofgem can use these powers.**

Through industry workshops Ofgem has also been developing an industry-wide code of practice for brokers that market energy to businesses. This code will set out that brokers have to behave in a fair and transparent way to give businesses confidence when using their services. Ofgem will publish the code for consultation in January 2014.

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Notes to Editors:

  1. *Overall, Ofgem estimates that back billing accounts for £178m of the overall total value of bills for SME customers. To put this into context it represents about 3% of the total value of annual billing in the SME sector.
     
  2. **More information on the powers Ofgem has obtained to enforce the Business Protection from Misleading Marketing Regulations (BPMMR) is here: http://www.ofgem.gov.uk/press-releases/ofgem-gains-new-powers-protect-businesses-misleading-marketing
     
  3. Ofgem is reviewing the arrangements for automatic rollovers and has expanded its existing rules, meaning 160,000 more businesses will get clearer contract information. These rules also limit the automatic rollover of contracts to one year.
     
  4. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority’s functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.
     
  5. Micro-business back-billing: supplier data covering April 2012 - March 2013

For further information contact:

Chris Lock: 0207 901 7225

Howard Rhoades: 0203 263 9629

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