Npower to pay back £70m, Why?

Nearly two million homes overcharged for gas are to be refunded, in one of the biggest pay-outs of its kind. Energy Company Npower has agreed to hand back £70m following a long-running row over changes it made to the way it charged customers in 2007. The firm admits it had not communicated the changes well, and £1.8m people are to receive an average refund of £35.

Npower says it will write to all those affected over the next two months, even if they are no longer customers. In 2007, the company started charging households a fixed monthly number of more expensive initial gas units - known as primary block units. Previously the amount of primary units charged varied according to the time of year. At the same time, Npower lowered prices and introduced some discounts. As a result, some low-use customers were billed for more than the usual number of primary units, leaving them out of pocket.

The company has always insisted most households benefited from the changes, but following an investigation by the industry regulator Ofgem, Npower initially agreed to repay 200,000 customers an average of £6 each. In a statement, Npower said "Although the vast majority of our customers benefited from the combined effect of the changes, some, who were low users of gas, did not" Watchdog Consumer Focus continued to campaign and some customers started legal action.

Npower conducted a review of everyone who was a gas customer at the time and it has now agreed to make a much bigger payment to 1.8 million people. The refunds will range from £1 to £100, with an average refund of £35. In a statement, Npower said "We're sorry that the complexity of the changes we made caused confusion. We're now doing all we can to improve our communication with customers." Npower, which has 6.5 million customers in the UK, will be writing to those affected and offering payments that can be cashed at the Post Office.

Head of Consumer Focus Mike O'Connor said it was an "excellent outcome" and showed a "major commitment from Npower to its customers". "Consumer Focus has worked closely with Npower to ensure that refunds are made fairly and that no customer loses out," he said. "A huge amount of work and collaboration has resulted in the right thing being done by Npower for its customers and we welcome this."It has been a great example of how consumer organisations can work with industry to deliver a fair deal for consumers."

1st October, 2010

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