npower to pay £3.5 million to vulnerable customers following sales investigation

The energy firm has setup a £3.5 million fuel poverty fund to help vulnerable energy customers after Ofgem found it had breached sales rules.

npower has agreed to pay out £3.5 million to vulnerable energy customers after an investigation into its sales practices by Ofgem.

The energy regulator found that between October 2009 and September 2012 npower had breached its marketing licence when it came to doorstep, over the phone and face-to-face sales.

Breaking the rules

The investigation found that npower agents were not up to scratch at gathering enough information on a customer’s typical consumption to use in price comparison, when determining whether to switch energy suppliers. This went on between January 2010 and June 2012.

Between October 2009 and April 2011 npower was also found to have failed to ensure that price comparisons were based on the tariff the customer was currently on. It was assumed a customer was on a standard tariff, which meant consumers were at risk of being misled as to the savings they could make.

And between January 2010 and June 2012 information on when customers would receive a direct debit discount and how direct debit levels would be reviewed was also found to be inaccurate.

The breaches found in the sales processes at npower meant customers may have been moved onto a more expensive energy tariff or may have achieved significantly lower savings than they were told, and in any case weren’t given the power to make a well-informed decision.

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Changes

npower has accepted the findings of the investigation and made changes to its sales process.

This includes crediting the direct debit discount from the supply start date, using a better consumption calculator when it is not possible to verify a customer’s actual consumption and improving training for sales agents so that they can ascertain a customer’s existing tariff details when carrying out comparisons.

Ofgem said it is satisfied that all the issues identified in the investigation had been resolved and hadn't found any evidence of misconduct since September 2012.

Paul Massara, npower CEO, said: “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.”

Compensation

npower will contact and refund customers directly affected by the poor sales processes by 28 February 2014.

Plus the energy giant has agreed to form a fuel poverty package amounting to £3.5 million that will directly benefit vulnerable energy customers.

npower will pay out £25 to each of its customers who form part of the core group of Warm Home Discount recipients. This will either be in the form of a credit on their account or payment to top-up a prepayment meter.

Any money leftover will be paid into the npower Health Through Warmth crisis fund. This provides financial help and support for vulnerable homeowners with cold related illnesses who need heating repairs or installations they cannot afford themselves. Beneficiaries do not have to be npower customers to receive financial help from the scheme.

In light of this behaviour Ofgem has decided that rather than imposing a significant penalty it will fine the energy company a nominal £1.

Other energy companies

Ofgem opened an investigation into npower in September 2010 along with SSE, EDF and Scottish Power.

EDF was ordered to pay £4.5 million  and Scottish Power £8.5 million to benefit customers, while SSE was fined a record £10.5 million which was paid to the Treasury.

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