Npower fine to be split between customers and charity

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Rather than collecting the fine as a penalty, Ofgem have agreed that the energy supplier should divide the money between the customers who have been worst affected, and charities helping vulnerable users.

They've also been set three customer service targets by Ofgem, which they must meet by the end of June 2016, or face a sales and advertising ban:

• reduce the number of outstanding bills over more than six months old from 46,000 to 15,000
• Reduce the number of complaints received more than 56 days ago to 4,500
• Cut the number of fresh cases referred to the Ombudsman to 600 per month

Bills, bills, bills

The problems started for Npower when they switched to a new billing system back in 2011 - and rather worryingly for Scottish Power and Co-operative Energy who have both introduced new billing systems more recently - four years on they're still having major issues.

Between September 2013 and December last year, Npower sent more than 500,000 late bills to their customers - current and former - many of which were also inaccurate.

Among the 2.1 million grievances made directly to the company during that time were complaints about receiving bills for hundreds of pounds, or only getting bills more than a year after moving to another provider.

Npower say they automatically send out letters of apology to any customer who has been waiting more than 30 days for a bill - and they also say they're the only supplier to write off final accounts if they don't get the last bill out within six months of someone leaving.

But that may be because of the scale of the issue - with some 46,000 bills being more than six months late. Ofgem have told them to cut this by more than two thirds to just 15,000 by next June.

Complaints about complaints

It's not just the billing system that's caused Npower problems either; the IT system that deals with complaints has been adding to their woes.

Many customers simply weren't dealt with promptly - which is why Ofgem have told them they must get the number of complaints made more than 56 days previously down to 4,500, from around 9,000 at present.

Furthermore, Ofgem say that a "significant number" of complaints were recorded wrongly, causing unresolved complaints to be marked as dealt with, while others were given multiple entries creating difficulties when it came to following them up.

When we complain to an energy company, they're supposed to tell us about both their own complaints handling procedures, and the existence of the relevant Ombudsman in case we're not happy with the way things progress.

Ofgem say Npower failed to tell some of their customers about one or both of these - although it seems that plenty of disgruntled customers have found their way to the Ombudsman anyway.

In fact, Npower's third target is to reduce the number of fresh cases taken to the Ombudsman about them from about 1,000 to 600 a month.

Costly errors

Npower say that the number of customers who'll receive recompense is less than 100,000, about 3% of their customer base.

However, they've also been told to "identify and repay all potential customers who may have been back-billed incorrectly from July 2010 to date".

That should cover everyone who's been affected since Npower's last famously large compensation bill of £63 million, which came about after they charged nearly two million people too much for their gas.

The rest of the £26 million will be given to projects that help vulnerable customers. It's not clear which they'll be: Citizens Advice have previously benefited, as have schemes like the Warm Homes Discount and similar industry initiatives.

Fines paid in this way have ranged from £300,000 to £10 million. Each has come with a measured response from Ofgem along the lines that implementing fines like this is much more beneficial than a straight penalty would be.

Even so, it's questionable how effective this method of enforcement is, particularly with regard to the Big Six, who can rely on a large proportion of their customers not to switch, or even to consider it.

Please release me

Part of Npower's continuing appeal, despite their customer service issues, is the fact that they often tend to tie with EDF for the position of cheapest among the Big Six.

But that doesn't make them cheapest in the market - and more people are making the switch to one of the many smaller, often more competitively priced, energy providers.

Unfortunately, as Npower themselves have had to acknowledge, leaving often isn't the end of the problems for many of their customers.