npower to pay £26m for failing to treat customers fairly
Press release
- Publication date
- Industry sector
- Supply and Retail Market
- npower’s billing issues affected over 500,000 customers between September 2013 & December 2014.
- npower failed to handle complaints effectively within a reasonable timeframe.
- Since Ofgem’s intervention, npower’s performance has improved, but it must continue to demonstrate improvements to its customers.
- First investigation to be concluded under Ofgem’s principles-based domestic Standards of Conduct requiring suppliers to treat customers fairly.
Ofgem is requiring npower to pay £26m as a consumer redress package, following the supplier’s billing and complaint handling failings. The money will be divided between some of the worst affected customers and charity. Ofgem has also agreed targets with npower for it to further improve its billing and complaints handling. If npower fails to meet these targets, it will stop proactive domestic sales activity and advertising until all are met.
Many of npower’s problems surfaced after they introduced a new IT system in 2011. Between September 2013 and December 2014, npower issued over 500,000 late bills. Some affected customers also received inaccurate bills with little or no detail on how these were calculated. During this period, npower customers made over 2m complaints with the majority about late or inaccurate bills. npower often failed to resolve these issues promptly, pursued debts which were in dispute and failed to keep its own commitments to customers on billing. This caused significant distress and worry for many.
npower also failed to deal with complaints effectively because of failures with its IT system. For several years, npower has recorded a significant number of complaints incorrectly, leading to unresolved complaints being logged as resolved and multiple records created for one issue. This created follow-up problems for customers. The supplier did not refer all customers to its complaint handling procedures and in some cases, failed to advise them that they could take their complaint to the Energy Ombudsman if unresolved after eight weeks.
Customers do not need to do anything as npower will contact those who have been worst affected.
Dermot Nolan, Ofgem chief executive said: “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 £26m sends a strong message to the industry that we expect them to act quickly and effectively to ensure a good customer experience.”
Notes to editors
1. Investigation
Investigation into npower’s compliance with Standards of Conduct
2. Targets and redress
npower’s targets include:
- reducing the number of late invoices over six months old from c46,000 to 15,000
- reducing the number of complaints over 56 days old from c9000 to 4,500
- reducing inflow of new Ombudsman cases from c1000 per month to 600 per month
- Identifying and repaying all potential customers who may have been back-billed incorrectly from July 2010 to date
If it fails to meet any of the agreed improvement targets by June 2016 then it will stop domestic sales activity and advertising.
3. Background
npower acknowledged to Ofgem in 2013 that it was having problems with its billing system. In December 2013, it agreed a recovery plan with Ofgem that included monthly monitoring of its progress. It also made a goodwill gesture of £1m to vulnerable customers.
Although npower made some progress, Ofgem was concerned that it had not yet resolved billing and complaints problems to the degree that the regulator expected to see.
In June 2014, Ofgem required further action from npower by requiring it to resolve major billing issues no later than the end of August 2014 and publish monthly progress updates on its website. If it failed to meet monthly targets, it would have had to stop all proactive telesales to new customers until the targets were met. npower met those targets. Ofgem also launched the parallel investigation into npower’s customer service failings, which we are concluding today.
In July 2015, Ofgem secured free energy for npower customers with late resolution of Ombudsman decisions.
The investigation is the first case to be opened under Ofgem’s principles-based domestic Standards of Conduct. They require suppliers to treat their customers fairly. They cover supplier behaviour towards customers; the information that suppliers provide to customers; and the effectiveness of suppliers’ customer service arrangements.
npower’s compliance with the various specific requirements of the Gas and Electricity Consumer Complaints Handling Standards Regulations 2008 was also investigated as well as the requirement to take all reasonable steps to send final bills within 6 weeks, under standard licence conditions (SLC 27).
About Ofgem
Ofgem is the independent energy regulator for Great Britain. Its priority is to make a positive difference for consumers by promoting competition in the energy markets and regulating networks.