Back Billing: Does your Business have to Pay?

5th November 2021

back billing for business energy
If your energy supplier has issued the wrong amount on your energy bill, they will claim back any outstanding amounts on your account by back billing for the money your business owes.

These historical miscalculations be a major cause of concern for your business as these bills tend to be extremely high.

What is back billing?

Back billing occurs unexpectedly when an energy company makes an error in charging for your consumption and has to claim back the money.

For example, if the wrong unit rate was used to calculate your utility bill, your energy supplier could send you a bill for the deficit between what you paid and what you should have paid. When this happens, the energy supplier sends a back bill to make you pay any outstanding amount.

While it may seem acceptable that businesses have to pay back what they owe to their supplier, if you consider the fact that a miscalculation could add up to a debt of tens of thousands of pounds over a few years, you can begin to see why this issue can be a real problem for businesses.

Why does back billing happen?

Getting a back bill for thousands of pounds can be obviously overwhelming and many people immediately think it’s some kind of scam. Nevertheless, back billing is a legitimate way for energy suppliers to claim back money for any underpayments or miscalculations. There are several reasons back billing can happen:

Poor energy management from your business can lead to under or over payments going left unnoticed for months and resulting in a hefty back bill. Unsurprisingly, it is more common for energy suppliers to back bill a business when they have undercharged them.

The supplier might have the wrong meter ID number for your business gas or electricity meter. This means that you might be paying for someone else’s energy supply. If their consumption is lower than yours, you might have to pay the company back through back billing.

If you don’t submit your meter readings regularly, your energy consumption will be based on estimated meter readings. If you end up underpaying for your bills due to these estimates, back billing might happen at some point.

Sometimes mistakes can be made by someone working for the supplier, which can lead to charges adding up. That can include, for example, misspelling some vital information against your account.

If your electricity or gas meter is broken or faulty and due to this, you haven’t been correctly charged for your energy supply, back billing is likely to happen.

What should you do if you receive a back-bill?

Don’t panic. Receiving a back bill can be worrying, especially as the amount is likely to be substantial.

If you do receive a backdated energy bill, don’t just accept this claim, call your energy supplier straightaway. Ask the supplier to explain why you’ve been back billed and ask them to double-check all the numbers against your account, as energy suppliers have been known to make mistakes. Don’t agree to make any payments immediately.

Request that the supplier double-checks all the readings and meter numbers. If the bill turns out to be accurate, you can ask about repayment methods. Often the supplier will allow you to pay the deficit in instalments if you cannot afford to pay it all in one sum.

Check all the details displayed on the back-bill are accurate. That includes your name, meter ID number and address. Sometimes the bill might actually be for someone else.

Nevertheless, if you are the correct recipient, you should check to ensure the company does not back bill you for more than a 12-month period.

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 back 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.

Back billing is regulated by law, and energy suppliers can only back-date a bill for up to one year. They can, however, chase you for any existing debts for up to 6 years.

How can your business avoid being back billed?

Take meter readings each month to ensure you can keep track of your energy consumption. If you ever think you got charged too much or too little, you can verify that by checking the record of meter readings.

Check that your bills are based on actual consumption and not on estimated usage. If you notice that at some point you are charged more or less than usual, you should contact your supplier asap. Similarly, if you don’t receive your bill one month you should let the company know immediately.

Check that your bull is based on real meter readings rather than estimates, making 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 rectify, and the bigger the potential back bill. And, if you don’t receive a bill on one of your energy supplies, let your supplier know to avoid the need for a huge back bill.

What if I’m moving premises?

If your business is moving premises, take a final meter reading at your old premises and take a reading at the new premises as soon as you arrive, and send both meter readings to your energy supplier.

Is your energy supplier is breaking the back billing rules?

Ofgem introduced a number of guidelines relating to back-billing. The most important one is that your energy supplier cannot make you pay for un-billed energy used beyond a 12-month period if you haven’t received an accurate bill.

The same rules apply to household and small business energy customers.

This rule may not apply if you have behaved obstructively or unreasonably to prevent accurate billing by blocking meter readings at your premises on more than one occasion or stealing gas or electricity.

Inform your supplier that you understand you are protected by the back-billing rules.

Business energy back billing can become a serious issue for businesses.

Backing billing can cause your business to owe thousands of pounds in debt on an energy account, leading to serious problems with cash flow.

The good news is that the suppliers are limited as to how far they can go back.

Back-billing legislation is under the Limitations Act of 1980 means UK energy suppliers are not allowed to claim back arrears for any errors over six years old. However, this also applies to errors when they may have charged your business account excessive amounts.

GEAB can help and advise on ways to minimise or reduce any back billing charges, or claim back money for you if the supplier has historically overcharged you.

How can I prevent my business from back billing?

You can prevent back billing from your energy supplier by checking your utility invoices are in keeping with your contracted rates, and that they have been calculated correctly.

As well as sending your readings to your energy supplier, keep your own records and take photos of your meter readings. This helps to ensure you get an accurate bill, based on real meter readings, not estimated billing. Having a record of your meter readings will also make it far easier to iron out any disputes.

If you do find any inaccuracies or have any queries regarding your billing, deal with those issues as soon as possible to prevent issues arising with your billing in future or receiving a demand for back billing.

The best way to ensure accurate billing based on actual consumption is by installing a Smart meter system. Smart meters offer real-time readings and send this up-to-date, highly accurate data direct to your energy supplier.

GEAB account managers offer dedicated service aimed at monitoring your business against all aspects of your energy supply, and working to ensure you are never landed with an unexpected back bill for underpayments or end up paying the energy supplier too much each month. We provide your business with the tools and expertise to take complete control of your energy costs. From energy monitoring of your consumption to bill validation, we save your business time and money across utility accounts.

GEAB energy advisors provide expert insight across all aspects of back billing, ensuring you have support. For further details, contact GEAB today from 9am-5pm, Monday to Friday, on 0800 084 3477.