Energy: npower agrees to £3.5m customer payout after breaching sales rules

npower has agreed to pay a total of �3.5m to vulnerable customers after breaching sales rules.

npower has agreed to pay a total of �3.5m to vulnerable customers after breaching sales rules. - Credit: PA

Energy company npower is to pay £3.5million to vulnerable customers after it was found to have breached energy sales rules.

Regulator Ofgem said the failings of doorstep and telesales staff meant customers were not able to make informed decisions on whether to switch suppliers.

The company remedied the shortcomings by September 2012 but has agreed to make a payment of at least £25 to each of its customers who receive the Warm Home Discount.

Ofgem said npower gained insufficient information about a customer’s consumption to enable them to decide whether to switch.

It also failed to ensure that comparisons between the price of npower’s supply and that of the customer’s current supplier were always based on the tariff that customers were on.

And information on when some consumers would receive their direct debit discount and how direct debit levels would be reviewed was also found to have been inaccurate.

Npower will write to customers affected by the breaches before assessing whether they are entitled to compensation.

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Ofgem’s investigation started in August 2010 and relates to activities that took place between October 2009 and July 2012.

Earlier this month, npower wrote to customers apologising for what was described by Ofgem as a ‘’serious deterioration’’ in customer service levels.

The German-owned energy giant admitted that a number of bills and statements had failed to go out on time, while some direct debit payments were not set up properly.

Npower said it would donate £1 million to a fund for vulnerable customers, with half of this channelled to Macmillan Cancer Support.

The company, which has 3.4million domestic customers, this week published a list of the actions it is taking to improve service.

The probe into npower comes as part of a wider market inquiry into mis-selling across the energy industry, which has already seen four investigations concluded.

SSE was fined £10.5million in April for ‘’prolonged and extensive’’ sales practice failures and in October, Scottish Power offered to pay £8.5million to customers.

Paul Massara, npower’s chief executive, said: “We’ve worked very closely with Ofgem as they’ve investigated these previous issues.

“It’s good to draw a line under this, so we can focus on our goal of becoming number one for customer experience by the end of 2015.”

Consumer Focus director Adam Scorer said: “Mis-selling is the original sin of energy competition. Npower had misled customers by phone and on the doorstep from 2010. Many people who would have been looking for the best deal found themselves poorly treated.

“One of the reasons consumer trust in energy companies is so low is that consumers have direct experience of being misled or treated unfairly. Ofgem is right to make sure action is taken and that companies compensate consumers directly.”

He added that it was unfortunate it has taken three years to bring the investigation to a close