Npower to pay £70m in refunds after huge billing blunder

The mammoth rebates relate to a billing blunder in spring 2007 which saw 1.8 million users given excessive payment demands (see the Cheap Gas & Electricity guide).

Npower will review the accounts of all affected gas customers at the time to determine how much each will receive. This includes ex-customers who have since switched.

Some 200,000 Npower gas customers were paid a combined £1.2 million in rebates early last year after Ofgem uncovered the blunder, but it has now emerged the energy regulator's intervention fell woefully short.

The new set of refunds will total up to £100 per person but will average £35 plus VAT and interest. Npower will contact all those due cash back over the next two months to offer the rebate so no action is necessary unless you are an ex-customer who has moved home since leaving Npower.

A help line will open on Monday to answer customer concerns on 0800 975 7938.

The climbdown follows a campaign by the Consumer Focus watchdog to ensure victims receive a fair payout. It says refunds will total £63 million, plus £3 million in VAT and £4 million in interest.

Gas customers on business tariffs, a gas pre-payment meter or anyone on the Gas guardian tariff, 2009 Price Fix tariff, Tracker Tariff, 1st steps (social tariff), or the Sign Online 8 tariff were not overcharged so won't get money back. The problem did not affect electricity customers.

Npower says sorry

Npower retail chief executive Kevin Miles says: "We’re sorry that the complexity of the changes we made caused confusion. We’re now doing all we can to improve our communication with customers.

"We have worked closely with Consumer Focus to find an answer to these concerns. We have decided to review every customer’s account for 2007.

"If any customer has paid too much we will make a payment to match the excess. We will add VAT and interest and ignore any benefits from other changes we made in 2007."

Mike O'Connor, Consumer Focus chief executive, says: "We are pleased with the final result. A huge amount of work has resulted in the right thing being done by Npower."

How did this happen?

The billing problems centre on the fact Npower has two tiers of charges, like most energy firms. You are charged more for the first set of units used in a period than when you reach the second tier, at which point the price per unit drops.

In this case, too much of many households' usage was deemed to be in the higher band. However, Npower stresses other changes it made in 2007 offset that loss, sometimes giving households an overall profit, though this won't stop rebates where a customer was charged for too many units in the pricier tier.

Further reading/Key links

Slash energy costs: Cheap Gas & Electricity Your rights: Fight Energy Direct Debits Capped tariff help: Is Your Cap/Fix Ending Soon? Boiler protection: Boiler Cover