npower may have overcharged 2.2m

Npower may have overcharged £2.2m

28/05/2008

The Times

Times Money readers have uncovered flaws in npower's billing system that could mean that the UK's fourth-largest energy supplier has overcharged millions of customers.

Their concerns are echoed by Energywatch, the energy watchdog, which has referred npower's billing operation to Ofgem, the energy regulator. An Energywatch spokesman says: We think that up to 2.2 million npower customers could have suffered from the same problem that Times Money readers have identified. If we are proved correct, we want to know what the company will be doing to compensate those who have lost out. The energy watchdog has sent information about npower's suspected faulty billing, along with more than 400 cases of suspected misselling, to Ofgem, triggering a formal investigation into npower's practices.

The billing problem centres on the question of how many units of gas npower can charge its customers each year at the higher of its two rates. The customers say that npower should not exceed the annual figure of 4,572 units, which it quotes in its literature and on its website. They argue that by charging more units at the higher price over 12 months npower is breaching its own terms and conditions.

But npower argues that its promise not to charge more than 4,572 units at the higher rate refers to a tariff year rather than a calendar year. Although a tariff year is usually the same as a calendar year, there are occasions when it is not. The company starts a new tariff year each time its tariffs are changed. This happened twice last year, resulting in a tariff year of only seven months from April to November.

This month npower announced that it had sacked six employees for mis-selling.

A spokesman for npower says: We are investigating the cases of alleged mis-selling that Times Money has brought to our attention. With regard to our billing, we charge more units at the higher rate in winter and fewer in summer, and this seasonal weighting is designed to be fairer to all customers equally. We suspended our seasonal weighting temporarily between April and November in 2007, and this resulted in some customers being charged more units in a calendar year at the higher rate than the stated figure of 4,572. What we promise is that we won't charge more than 4,572 units at the higher rate in a tariff year. Normally a tariff and a calendar year are the same - 12 months - but every time we make changes to the tariff system we start a new tariff year. In our short tariff year of seven months (April to November 2007) we didn't charge anyone more than 4,572 units at the higher price, but over a full 12 months we did. As a balancing measure, we reduced our gas prices by 20 per cent in April 2007.

However, an Energywatch spokesman says: We do not think that it is good enough for npower to say that it can make a year into anything it wants, simply by renaming it a tariff year. We look forward to seeing Ofgem's response on this matter. An Ofgem spokesman says: We are investigating npower with regard to suspected mis-selling and asking questions relating to suspected inaccurate billing. If we find that the company has breached the terms of its supply licence, we have the power to fine it up to 10 per cent of the relevant subsidiary's turnover and require it to amend its behaviour.