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Back Billing

Back billing can be a real nightmare for businesses. In this guide, you can find out the rules on back billing, what to do if you get a backdated bill and how to avoid one altogether.

Back billing is when your energy supplier sends you a bill to account for mistakes that have been made in calculating your bills in the past.

For example, if the wrong unit rate was used to calculate your bills, your energy supplier could send you a bill for the difference between what you paid and what you should have paid.

While it may seem fair that businesses have to pay what they owe, when you think that a miscalculation could add up to a debt of tens of thousands of pounds over a few years, you can start to see why this can be a real problem for small businesses in particular.

The legislation that applies to back billing is the Limitations Act of 1980. Under this act, for a 'simple' contract (of which an energy supply agreement would qualify), the upper limit of any claim is 6 years. In other words according to UK legislation your energy supplier cannot claim monies owed for any back billing in excess of 6 years.

Clearly these rules don’t give businesses much protection.

The energy industry itself has actually taken steps to make back billing fairer for businesses.

Energy UK, the trade association for the gas and electricity sector and energy suppliers, has introduced an additional set of voluntary standards for the back billing of micro business energy customers. (They do not apply to larger businesses)

Currently, the rules for those business energy suppliers signed up to the Energy UK voluntary standards on back billing are:

  • your electricity supplier can back bill your business for mistakes made as long as three years ago;
  • for your gas supplier they can back bill your business for mistakes made as long as four or five years ago;
  • you can be back billed even if the miscalculation was the energy supplier’s mistake, rather than yours;
  • your energy supplier can demand that you repay them instantly

Some business energy suppliers have gone further than this and have limited their rights to claim monies under a back bill sometimes for as little as 12 months. To find out the policy your business energy supplier operates see the What does your supplier offer? section below.

In addition, the Energy UK standards say that suppliers should:

  • take regular meter readings;
  • make it easy for you to give meter readings;
  • help you understand how to get accurate bills;
  • make your payment options clear if you do get sent a back bill and let you know where you can get independent advice;
  • treat you fairly, taking into account your circumstances and let you know your rights;
  • act as soon as they discover an issue with your account, and if possible, contact you before they send the back bill;
  • limit any electricity back bill to three years and gas to five years if the mistake wasn’t your fault.
Also however the suppliers themselves have in some cases voluntarily gone beyond this to offer greater protection to their micro business customers. However this approach is patchy and so it pays to know what your supplier's policy is. Our guide below outlines the current policies of each supplier
  • British Gas Business is signed up to the Energy UK standards and currently limits micro business back billing to 2 years; it will reduce this to one year before the end of 2014. Limits only apply after the customer is deemed to have done all that can be done to avoid back billing and where the supplier or industry processes are at fault.
  • CNG is not signed up to the Energy UK standards. In effect under the Limitations Act a back bill can be issued for up to 6 years after the event.
  • Corona Energy is signed up to the Energy UK standards and limits back billing for micro businesses to 4 or 5 years for gas and 3 years for electricity.
  • DONG Energy Sales is signed up to the Energy UK standards and currently limits micro business back billing to 2 years where it is at fault; Dong has been considering a reduction to 1 year in 2014 but this move has not been confirmed.
  • Dual Energy is not signed up to the Energy UK standards. In effect under the Limitations Act a back bill can be issued for up to 6 years after the event.
  • Ecotricity is not signed up to the Energy UK standards however it limits back billing to 2 years for all businesses when it is the party responsible for the miscalculation.
  • EDF Energy is signed up to the Energy UK standards and limits back billing for micro businesses and “EDF defined SMEs” to 3 years. EDF have committed to reduce this to 1 year by the end of 2014.
  • Extra Energy is not signed up to the Energy UK standards. In effect under the Limitations Act a back bill can be issued for up to 6 years after the event.
  • E.ON is signed up to the Energy UK standards and limits back billing for all SMEs including micro businesses to 1 year.
  • Gazprom Energy is signed up to the Energy UK standards and limits back billing for micro businesses to 4 or 5 years for gas and 3 years for electricity.
  • Haven Power is not signed up to the Energy UK standards. In effect under the Limitations Act a back bill can be issued for up to 6 years after the event.
  • Hudson Energy is not signed up to the Energy UK standards. In effect under the Limitations Act a back bill can be issued for up to 6 years after the event.
  • nPower is signed up to the Energy UK standards and limits back billing for micro businesses to 2 years and has committed to reducing this to one year during 2014.
  • Opus Energy is signed up to the Energy UK standards and currently limits back billing to 1 year for all SMEs including micro business.
  • Ovo Energy is not signed up to the Energy UK standards. In effect under the Limitations Act a back bill can be issued for up to 6 years after the event.
  • Scottish Power is signed up to the Energy UK standards and currently limits micro business back billing to 2 years; it will reduce this to one year in 2014.
  • SSE is signed up to the Energy UK standards and limits back billing for micro businesses to 1 year. SSE will extend this to all SMEs by the end of 2014.
  • Total Gas and Power is signed up to the Energy UK standards and limits back billing for micro businesses to 4 or 5 years for gas and 3 years for electricity.

The restaurant cut-off after getting a backdated bill for £18,000

The owner of a small restaurant in Surrey was sent a backdated bill for £18,000 and was disconnected for two weeks as a result of mistakes made in calculating her bills over the course of five years, according to this case study from Consumer Focus.

When the owner got the backdated bill for £18,000, she couldn’t understand what had happened because meter readings had been taken and she had always paid her bills regularly and in full, She thought everything was in hand and hadn’t seen any reason to double-check.

It turned out that the meter readers had been reading her meter as a five-digit meter, rather than a six-digit one, which meant that all her bills were miscalculated for five years and a significant debt had built up.

The business didn’t have the necessary cash-flow to pay £18,000 in one go, so the owner tried to negotiate a repayment plan. This supplier made an initial offer of around £1,900 a month, which the owner felt was too much, so the negotiations continued to go back and forth for a few months, before finally an 18-month repayment plan was agreed. But just a week later, the electricity was disconnected and the owner was told she needed to pay £20,583 (the amount of the back bill, plus disconnection charges and a £1000 deposit) to be reconnected.

The owner went to her bank and found the money but it was three weeks before she was reconnected, during which time she lost an estimated £15,000 in takings.

How do you make sure you don’t get back billed?

Here are some tips to make sure you don’t get back billed,

They’re not just to stop backdated bills though, they’re also best practice, which all businesses should try to follow to make sure you get accurate bills.

Take monthly meter readings 

Send them to your energy supplier and keep your own record in a spreadsheet, or take photos of your meter. This will help to ensure you get an accurate bill, based on real meter readings, not estimated ones. Having a record of your meter readings will make it easier to iron out any disputes.

Scrutinise your bills

Check that it’s based on real meter readings rather than estimates, make sure the unit rate and standing charge are correct and be on the look-out for bills that are higher or lower than normal. If there’s anything unusual call your energy supplier straightaway - the longer you leave it, the harder it will be to sort out, and the bigger the potential backbill. And of course if you don't get a bill, don't congratulate yourself on not having to pay, let your supplier know and avoid the need for a huge catch-up invoice.

Take extra care when moving premises

If you’re moving business premises, make sure you take a final meter reading at your old premises and an opening one at the new premises and send them to your energy supplier. See our guide to moving premises to find out more.

Call Straightaway

If you do get a backdated bill, don’t just accept it, call your energy supplier straightaway. Get the supplier to explain why you’ve been back billed and ask them to double-check all the numbers. (Energy suppliers have been known to make mistakes now and again).

You should also make sure that they haven’t back billed you for longer than they lay out in their rules. (See above for a supplier-by-supplier breakdown).

If the back bill is accurate, try to negotiate a repayment plan with the energy supplier if you’re not in a position to pay it all at once. Get them to explain whether there’s any risk that you could be disconnected and work with them to avoid this at all costs.

More Information on Back Billing

For more information on back billing or simply to find yourself a deal with a supplier which limits their back billing call us on 0800 051 5770, we'd love to hear from you.