News & Insight

Ofgem hits Npower with record fine

Christian Nellemann

Ofgem's record fine for Npower is a landmark for the energy industry

Another day, another damaging blow to the reputation of one of the Big Six. And this time it’s front page news.

Ofgem has announced a record settlement of £26m to be paid by Npower due to billing issues for 500,000 customers. The money will go to the worst affected customers who, between September2013 and 2014, suffered from late or inaccurate bills. This created an astonishing two million complaints during the period.

The fact that Ofgem had to step in to correct this disaster says a lot about how serious it was. It’s an unprecedented calamity, and it’s been given an unprecedented punishment. And Npower will need to tread carefully; otherwise it could lose its ability to trade.

Ofgem gets serious about service

If you look at the biggest penalties dished out to energy firms in recent years, they typically relate to legal negligence or product faults. British Gas paid £11.1m for failing to insulate homes in December 2014, and E.On was charged £7m last month for smart meter failures. Breaking sales rules and providing faulty products has always, rightly, been punished.

But it’s interesting that this record fine is fundamentally to do with service. In justifying the penalty, Ofgem’s chief executive Dermot Nolan talked about how Npower ‘treated its customers poorly’. A £26m fine – put into perspective by the fact that the previous highest was £12m – was essentially because customers were not treated well.

Ofgem has taken a stand for customer service, which is great news for the industry and great news for customers. To Npower’s credit, it has accepted its mistakes and agreed to a landmark fine – no one could accuse them of hiding from this issue.

A reminder of why customers must always shop around

As a customer, the best way of dealing with poor service from a supplier is shopping around for a better provider. The more you shop, the more competitive a marketplace becomes – and as a result, services are improved by all suppliers because complacency is no longer an option.

And so to all energy customers, small businesses or otherwise, I say this: spend less time complaining, and more time shopping. You have every right to complain of course, but you’ll only see real change from suppliers when you look for a deal elsewhere. Change keeps the giants on their toes, and gives smaller, nimbler businesses a chance to grow.

That’s how you get the service you deserve.