Credit: Sunshinecity/Flickr

Npower burned by £26m fine for 'chaotic' customer service

The penalty is the biggest to date from Ofgem, which criticised the energy firm for poor customer treatment.

by Rebecca Smith
Last Updated: 18 Dec 2015

The energy industry doesn’t have the most glowing reputation at the moment, despite efforts from Ofgem to crack down on bad behaviour. A quick look at the regulator's investigations shows not only does it still have a very busy job but ultimately, it's failed to stop the deluge of complaints coming from consumers. 

To hear another energy company has been failing customers is unlikely to cause much surprise, but the scale of the penalty imposed just might. Npower is facing an eye-watering £26m fine after sending out inaccurate bills and failing to deal with complaints correctly. Ofgem said the record settlement was ‘for failing to treat customers fairly’ and the money would be split between some of the worst affected individuals and go to charity.

Between September 2013 and December 2014, the German-owned supplier issued more than 500,000 late bills after introducing a pesky new IT system. To throw extra confusion into the mix, some customers also received inaccurate bills with little or no detail on how these were calculated.

More than two million complaints were made by Npower customers during the period. The investigation found the energy firm not only failed to resolve the issues promptly, but also ‘pursued debts which were in dispute and failed to keep its own commitments to customers on billing’. The worst affected didn’t actually receive bills for more than a year. Although UK billing rules that firms can’t charge for energy used more than a year earlier, that didn’t stop Npower.

‘Not only have its billing and complaint handling procedures been chaotic, it treated many of its customers poorly, which is completely unacceptable,' said Dermot Nolan, Ofgem’s chief executive. 'Npower’s management failed to act quickly enough to protect its customers when things went wrong.’

Npower recorded complaints incorrectly for several years, leading to unresolved issues being noted as resolved and multiple records being created for one complaint. Which is quite spectacular in its own way.

Simon Stacey, MD of domestic markets for Npower said the firm was ‘very sorry about what has happened and that is why we have agreed this significant package of customer redress’. Stacey reported the company had reduced complaints by nearly 70% since the beginning of the year. 

Rival energy company E.ON might have found its own dubious silver lining though, as it no longer holds the ‘honour’ for biggest Ofgem penalty. Npower’s £26m fine is more than double the £12m meted out to E.ON in May last year for breaking energy sales rules. It doesn’t have much to cheer about though – the German firm has been in the spotlight frequently since then with further fines for overcharging customers in April and its smart meter failure last month.

Ofgem said it had agreed targets with Npower for it to improve its billing and complaints handling, but the frequency and scale of such poor showings from energy firms leaves many questions as to the success of regulation in the industry. If the big companies really did want to improve their standing with customers, they might do better to take a look at some of the smaller providers which trump the six biggest in satisfaction surveys quite considerably.

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