Npower, claim to be Britain’s brightest energy company, but it appears that customers should think again because someone appears to have acted a ‘little dim’.
The company has been accused of overcharging its gas customers by more than £100 million, paving the way for compensation for millions of people.
Consumer Focus, the consumer champion, has announced this week details of an investigation which shows that the energy company breached the terms and conditions of its supply licence, leading to a potential overcharging of large numbers of its customers.
A Consumer Focus spokeswoman says: “We believe the breach of contract, between April 2007 and April 2008, affected almost all of npower’s 2.2 million gas customers and the potential overcharge could be up to £78 per customer.”
The consumer group is now looking at ways in which a substantial number of npower’s gas customers might obtain redress, which has so far been denied them. If, as some aggrieved npower customers suspect, the overcharging is found to average close to £50 per customer, the energy company could be facing a compensation bill of more than £100 million.
The spokeswoman says: “We think npower should reopen negotiations on redress for its customers, but it has so far refused to do so. We now have to consider what other methods we could use to make it happen.”
The findings of the Consumer Focus study will come as a huge embarrassment to Ofgem, the energy regulator, which had investigated the same complaints earlier but failed to determine whether any overcharging had taken place. It confined itself to saying that npower had failed to notify customers of some tariff changes and that some of them might have suffered a small financial loss.
At the end of the Ofgem investigation npower agreed voluntarily to pay compensation totalling £1.2 million to 200,000 customers, an average of £6 a head.
Liberal Democrat Shadow Energy and Climate Change Secretary, Simon Hughes is writing to Ofgem asking it to reopen its inquiry into npower’s overcharging. He is also calling on npower to re-examine its calculations of how many gas customers it has overcharged.
Simon Hughes says: “Npower stands accused of some very serious failures, including failure to compensate large numbers of its customers, many of whom may not even be aware that they have been overcharged. It should be compelled to rectify this situation speedily.
“More widely, it appears that we need a new regulatory framework for the energy industry, which has some teeth, and a regulator that is prepared to use those greater powers in the interests of consumers.”
The question over npower’s alleged overcharging focuses on the number of units of gas it is allowed to charge at the higher of its two tariffs. In its contracts with customers, npower promises that it will not charge more than 4,572 units at the higher rate a year.
Npower has argued that its promise of not charging more than 4,572 units a year refers not to a 12-month period, but to a “tariff year”. It starts a new tariff year whenever it changes its method of charging, so a tariff year can be shorter or longer than 12 months. In 2007 it changed its charging method twice, on May 1 and November 1, so the tariff year was one of only six months.
Consumer Focus has also questioned claims made by npower in its marketing literature. In February 2007 npower launched a campaign aimed mainly at British Gas customers, boasting that its gas prices were being cut by 16 per cent. Consumer Focus reckons that when npower’s charging of additional higher rate units is taken into account the price reduction was only about 8 per cent.
A Consumer Focus spokeswoman says: “We are very concerned that npower claimed that it was the cheapest gas supplier in the market when it was not. The change in how it charged for gas meant that over the year it was, in fact, on average £10 more expensive than British Gas and £70 more expensive than Scottish and Southern Energy. We want to engage with npower to obtain a fair outcome for its customers but the company considers the matter closed.”