Npower gas customers to get a £70m refund
- 1 October 2010
- From the section Business
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.
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.
The refund is expected to draw a line under a row which had simmered for more than three years.
Richard Frost, of Npower, admitted that the company was slow to get started with refunds.
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.
"We are sorry that the complexity of the changes we made caused confusion. We are 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 an great example of how consumer organisations can work with industry to deliver a fair deal for consumers."
Claiming the money
Those eligible for the payments - who were gas customers - will receive a letter from Npower which they can then take to the Post Office to cash in.
For those who have moved home, Npower will confirm the new address before sending the letter. All letters should be received by the end of November.
The amount of the payment people are entitled to will vary by tariff, gas consumption, and when they became an npower customer - but the average will be £35.
Those who previously received a refund of £6 will have that amount deducted from the latest refund.
Those not eligible for a refund include: electricity customers, business customers, gas pre-payment meter customers, Gas Guardian tariff customers, 2009 Price Fix tariff customers, Tracker tariff customers, 1st steps customers, Sign Online v8 tariff customers, and those with a debt greater than the compensation due.