Npower pays £3.5m Ofgem penalty out to customers

Npower breached sales rules covering how energy deals can be sold on the doorstep and over the phone

Trust in the big six energy providers suffered a further blow on Friday as npower was given its second fine in a month, this time £3.5m, for misleading consumers.

The company agreed to pay the £3.5m to vulnerable customers after an investigation by the energy regulator, Ofgem, found it had breached sales rules on the doorstep and over the phone between 2010 and September 2012. The £25-per-house payments will be made to customers eligible for the “warm home discount”, who are typically over 60 and in receipt of pension credit.

The regulator said npower had failed to get enough information from potential customers about their energy consumption to enable them to decide whether it was worth switching from their existing supplier. Furthermore, it did not always ensure that comparisons between the price of npower’s service and that of the customer’s current supplier were based on the tariff that customer was on.

Ofgem also said that npower salesmen misled people by giving them inaccurate information about direct debits and failing to gain sufficient information to direct them to the cheapest deals. It added that the breaches had since been addressed and remedied.

Sarah Harrison, a senior partner at Ofgem, said: “Whilst npower was making changes to improve its sales processes, weaknesses remained which affect consumers’ ability to compare supplier offers fairly. These issues have been fully addressed.”

Paul Massara, chief executive of npower, said: “It’s good to draw a line under these issues.”

Adam Scorer, of the watchdog Consumer Futures, also welcomed the move, although he said the process of taking the big six to task for mis-selling practices need to be speeded up. “Mis-selling is the original sin of energy competition. Npower had mislead customers by phone and on the door step from 2010. Many people who would have been looking for the best deal found themselves poorly treated,” said Mr Scorer. “It is unfortunate that it has taken three years to bring this investigation to a close.”

Npower’s fine comes less than three weeks after it was forced to apologise and hand over £1m to vulnerable consumers after its poor customer service led to it being named as the most complained-about energy company.

But the company is by no means alone. In March 2012, EDF paid £4.5m to vulnerable customers for breaching marketing rules. SSE was found guilty of “prolonged and extensive” mis-selling in April, receiving a £10.5m penalty, while Scottish Power paid £8.5m in October.

Npower’s failure to give potential customers all the information needed to decide whether to change supplier comes against a background of declining switching activity in recent years, according to new research from the Helsinki-based consultant Vaasaett. Just 11.5 per cent of households have switched this year – even after a jump in November following the price hikes by the big six – compared with 21 per cent at its peak in 2006.

Much of the decline came be put down to the phasing out of doorstep selling in 2011. According to Vaasaett, the lower the switching level, the easier it is for the big six to drive through price rises because it suggests customers have a greater tendency to stay with their existing supplier.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

The long walk west: they fled war in Syria, only to get held up in Hungary – now hundreds of refugees have set off on foot for Austria

They fled war in Syria...

...only to get stuck and sidetracked in Hungary
From The Prisoner to Mad Men, elaborate title sequences are one of the keys to a great TV series

Title sequences: From The Prisoner to Mad Men

Elaborate title sequences are one of the keys to a great TV series. But why does the art form have such a chequered history?
Giorgio Armani Beauty's fabric-inspired foundations: Get back to basics this autumn

Giorgio Armani Beauty's foundations

Sumptuous fabrics meet luscious cosmetics for this elegant look
From stowaways to Operation Stack: Life in a transcontinental lorry cab

Life from the inside of a trucker's cab

From stowaways to Operation Stack, it's a challenging time to be a trucker heading to and from the Continent
Kelis interview: The songwriter and sauce-maker on cooking for Pharrell and crying over potatoes

Kelis interview

The singer and sauce-maker on cooking for Pharrell
Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea