Water retailers will only be permitted to back-bill customers they have under-charged for a maximum period of 16 months, under new rules laid out by Ofwat.

The regulator has taken the latest step towards opening the business water retail market in England from April 2017, with the publication of a new code of practice to protect eligible business, charity and public sector customers in England.

As part of the code, if customers have been under-charged, retailers can send catch up bills covering a period of up to 16 months only – down from the current six-year threshold.

Commenting on the publication of the code, Ofwat director of retail market opening Adam Cooper said: “We are working hard to put in place all the necessary elements to ensure that next April the world’s largest competitive water market opens ready for business.

“In learning from the experience of other sectors opening to competition, we know it is important to have the right customer protections in place.

“The code we have produced will deliver the right, targeted safeguards, especially for smaller organisations, and in doing so will strengthen the new, competitive retail water market.”

The code also makes particular provision for micro-businesses – those with fewer than 10 employees – allowing for them to arrange affordable repayment plans for outstanding bills and have a seven-day cooling off period to change their mind or cancel a contract.

National Chairman of the Federation of Small Businesses, Mike Cherry, said: “The Federation of Small Businesses (FSB) believes competition in the water market must promote customer engagement, raise standards, promote innovation, and keep prices as low as possible.

“When the new water market opens, smaller business customers will require protections and assurances. They will also need relevant and timely information to help them make informed choices about their water provider.

“No small business should be worse off as a result of competition. FSB is pleased to have had the opportunity to feed into Ofwat’s plans, particularly around proposals for clear contract and billing information, and we look forward to ensuring the small business voice is heard in the debate moving forward.”