Npower faces big penalty for 'price freeze'

Gas and electricity firm npower faces an unlimited fine after pleading guilty in court to misleading consumers.

The group had issued leaflets in the North-east offering to freeze the price of gas bills from April 2002 until last January. But those who took up the offer saw a price rise of 5.5 per cent.

The trading standards department of Middlesbrough Council conducted an investigation after receiving two complaints from customers.

Npower, owned by German utility RWE, had issued the freeze for the whole country, but the price was higher than the existing price in the north-east area.

Earlier this month a magistrates court in Teesside passed on the sentencing for the case to the Crown Court as it did not feel its powers to levy a fine of up to £5,000 were adequate. In court, npower said it was "disappointed" the case had been referred. "We accept that we made a mistake ... but all our marketing was carried out in good faith. We have reinforced the checks and balances in our campaign procedures to help ensure this doesn't happen again."

Npower said the 35,000 customers who had called in response to the leaflets were told their prices would rise "slightly". But the customers who rang the trading standards office had said they were not told about the increase.

Npower said it would "sympathetically" consider any complaint from customers who felt the rise had not been made clear, but maintained they had been told of it when responding to the adverts.

John Wells, head of the Middlesbrough trading standards office, urged npower customers to examine their gas bills as they could be eligible for compensation. "Since the energy market was opened up, competition for customers has increased greatly," he said. "It is therefore imperative that the advertising used is transparent."

Customers who did not take up the freeze would have later experienced a price rise of 6.79 per cent on average, although npower said it did not know of this when the campaign was launched.