Npower fined record £26m for late billing shambles

The energy regulator Ofgem today announced that some of the £26 million – the largest fine of its kind to date – will be paid to around 100,000 customers who were worst affected by the issues, and the rest to charity. Npower says its customers don't need to do anything as it'll proactively approach them to give details of the redress package.

Ofgem's investigation found:

• Late billing issues affected over 500,000 customers between September 2013 and December 2014.

• During this period, Npower customers made over two million complaints with the majority about late or inaccurate bills.

• Npower's complaints-handling was "chaotic" and failed to deal with complaints effectively within a reasonable timeframe.

• Since Ofgem's intervention, Npower's performance has improved, but "it must continue to demonstrate improvements" and meet specific targets or face an advertising ban.

During this time MoneySavingExpert.com saw a raft of complaints from customers who'd switched away from Npower thinking everything was in order, only to receive huge back-bills:

• @j40x tweeted: "We've put in a complaint. Left Npower June 2013, recently got bill chasing £1,000+. At least it can't cut us off."

• @finnigan1971 tweeted: "I just got a £350 bill from Npower 16 months after I left."

• @snifferphillips tweeted: "Left a year ago. Got a bill for £78 couple of weeks ago! Spent almost an hour on hold trying to talk to someone to find out why."

'This should send a loud warning bell to other providers'

Archna Luthra, energy expert at MoneySavingExpert.com, says: "We revealed the true scale of Npower's bungling system in 2014 after we received huge numbers of complaints from people who had cash demands of £100s many months late, in some cases well after they ditched the firm.

"Npower eventually agreed to be more lenient with victims after we campaigned for it to do the decent thing, by wiping some people's bills. But it didn't help everyone out, and it has got its just desserts here.

"This is the largest fine given to a domestic supplier and should send a loud warning bell to other providers to shape up. The energy industry seriously lags behind others on customer service and there should be zero tolerance for behaviour like this.

"Anyone not happy with the service their provider is giving should vote with their feet. There are suppliers out there with decent service offering cheap prices.

"And if your supplier isn’t taking your complaint seriously, take it to the free, independent energy ombudsman."

What happened and who's affected by the issues?

The late billing issues affected more than 500,000 customers between September 2013 and December 2014. Ofgem says many of the problems surfaced after Npower introduced a new IT system in 2011.

Some affected customers also received inaccurate bills with little or no detail on how they were calculated. Npower told Ofgem in 2013 it was having problems with its billing system and in December 2013 it agreed a recovery plan which included monthly monitoring of its progress. Npower also made a 'gesture of goodwill', paying £1 million to vulnerable customers.

However in June 2014, Npower was told by Ofgem that it must meet strict targets to fix the billing problems and improve its complaints procedure or face a curb on sales, after it had sent ex-customers huge bills months and in some cases over a year after they'd left.

Npower says under 100,000 customers (about 3% of its user base) will receive redress, with an average figure of between £100 and £200 each. We asked why only 100,000 customers out of 500,000 affected would receive redress and Npower and Ofgem say they agreed a criteria for the redress package. This includes redress for those who received bills a year after they should have done and for those who had complaints that had not been resolved within 12 months.

MoneySavingExpert.com's campaign

In May 2014, MoneySavingExpert.com saw a raft of complaints on our forum and other social media from customers who'd switched away from Npower thinking everything was done and dusted, only to receive bills months later – meaning the firm was essentially punishing people for its own mistakes. Customers still with the company at that point also reported bills arriving late.

At the time, Npower wouldn't budge from its "back-billing" policy, where it only wrote off charges when it was forced to by an industry code. The code says bills over 12 months old should be waived for customers who have experienced issues that are the company's fault.

MoneySavingExpert.com and its founder Martin Lewis launched a sustained campaign to get the firm to wipe bills, or at least reduce them to manageable amounts or offer an easy repayment plan to ensure no one was put into fuel poverty.

It finally had a "rethink" of the situation after discussions with Martin about finding an acceptable solution. It told us it would wipe bills for those customers who hadn't received a back bill. But contentiously it also said that for those who had received a back bill but hadn't paid yet, they'd still have to cough up the money. Npower also said it wasn't going to automatically refund those who had received a back bill and already paid it, but if paying the bill had caused problems, it would look at issues on a case-by-case basis.

I'm affected, what happens next?

Npower says it will proactively contact all those customers affected to tell them of the redress package. It aims to do this and pay out the money by March 2016. For customers who are still with Npower, pre-pay customers will receive a top-up voucher, or if Npower has your card details, your bank account will be credited. Customers can also request a cheque or ask for another method of payment.

The company says customers who've since left it and moved address, and who think they may be affected, should contact it after March 2016.

'Chaotic' complaints handling

Dermot Nolan, Ofgem chief executive, says: "Npower failed its customers. Not only have its billing and complaint-handling procedures been chaotic, it treated many of its customers poorly, which is completely unacceptable.

"Npower's management failed to act quickly enough to protect its customers when things went wrong with changes to its IT system. It's important that all suppliers ensure they follow the principles of treating customers fairly at all times. The payment of £26 million sends a strong message to the industry that we expect them to act quickly and effectively to ensure a good customer experience."

Npower 'very sorry'

Npower's been told to meet specific performance targets by June 2016. If it fails to meet these, it will have to stop all domestic sales activity and advertising until they're met. It must:

• Reduce the number of late invoices over six months old from 46,000 to 15,000.

• Reduce complaints over 56 days old to 4,500.

• Reduce the number of new Ombudsman cases to 600 a month.

• Identify and repay all potential customers who may have been back-billed incorrectly at any point since July 2010.

Simon Stacey, Npower's managing director of domestic markets, says: "The last few years, since we changed the systems that support our domestic business, have been very disappointing for our customers – and for Npower.

"We are very sorry about what has happened and that is why we have agreed this significant package of customer redress. We've reduced complaints by nearly 70% since the beginning of this year and as part of this package of measures with Ofgem we have agreed targets for significant sustainable customer service improvement that everyone at Npower is working tirelessly to achieve."