MSE News: Npower to pay £70m in refunds after billing blunder

edited 1 October 2010 at 1:48AM in Energy
174 replies 21.4K views


  • Is this method of calculating the over charging too simple?
    In 2007 Npower suspended sculpting between I believe April and November? and introduced the flat 4572/365 method.
    Why not work out on a daily basis for that period the amount of high units charged on the flat method and then work out how many should have been charged under sculpting. The difference is the overcharge.

    npower introduced two changes in 2007 both of which had a retrospective as well as a forward looking adverse effect on accounts.

    Date range roughly June 2006-October 2008. There would also be two different price differentials to consider.

    In my opinion it is irrelevant whether the calculation method is complex, simple or convenient for npower.

    The fact is they have overcharged customers and agreed to re-imburse them. They need to find a way to calculate precisely how much each individual customer has been overcharged and repay that amount plus interest. Simple.

    As I explained above if they are using customers anniversary dates then many customers will be receiving less than they overpaid.

    It appears that two customers who pay the same for their gas and were overcharged by the maximum amount will receive very different sums because npower are choosing anniversary dates to start their calculations. As I previously said, using this method customers are not being re-imbursed but finding themselves in an anniverary date lottery.

    This is to the unfair advantage of npower and the detriment of customers. Exactly what the repayment is supposed to be rectifying.
  • edited 22 October 2010 at 5:08PM
    Terrylw1Terrylw1 Forumite
    7K Posts
    edited 22 October 2010 at 5:08PM
    The anniversary date is only used to determine when the 4th quarter hits so they can start tier 1 back at 0 units used. This anniversary rate could be after when this all changed back or part way through. If it's after, it's one calculation, if in between, they perform 2 calculations. Any change in price would mean they would need to recalculate in more seperate parts but also adding in the expected pro rata amount at tier 1.

    It's no different to recalculating bills across tariff changes which is a frequent thing Suppliers do.

    It's a misleading statement. However, if they are not calculating in these seperate blocks, they will get it wrong.
    :rotfl: It's better to live 1 year as a tiger than a lifetime as a worm...but then, whoever heard of a wormskin rug!!!:rotfl:
  • edited 22 October 2010 at 5:30PM
    DirectDebacleDirectDebacle Forumite
    2K Posts
    edited 22 October 2010 at 5:30PM
    I don't disagree with you. The fly in the ointment is that npower throughout this issue claimed as an integral part of their defence that customers primary blocks were zeroed not on their anniversary dates but on the dates npower decided to alter the charging system i.e. 1/10/04,1/5/07 and 1/11/07. This was described as a 'tariff year' and later re-incarnated as a 'cycle'. On that basis claims were made that the anniversary of the primary block should therefore be 1st April as it was first introduced on 1/4/03. npower settled these claims rather than test their arguments in court.

    Using a customers start date as opposed to 1st April will be a much cheaper option for them. As you point out it is not clear how they will do this for customers whose start date falls between May and Nov. These accounts will require two calculations and we will have to wait and see if this is being done.
  • edited 23 October 2010 at 5:22PM
    meggsymeggsy Forumite
    741 Posts
    edited 23 October 2010 at 5:22PM
    I read a very interesting article in The Times today .....

    "Campaigners say npower owes more compensation for customers who were overcharged as row drags on

    Meg Hillier, the newly appointed Shadow Energy and Climate Change Secretary, has this week given her support to aggrieved npower customers in calling on the energy company to look again at whether it overcharged customers in 2004-05.
    Npower has already admitted that, in 2007-08, it charged 1.8 million of its gas customers for more units at the higher of its two tariffs than they were expecting to pay. After a campaign by Times Money and Consumer Focus, the energy watchdog, it is sending out refunds totalling £70 million.
    But campaigners now want to highlight that these refunds are for 2007-08. They do not include any payment for the same type of overcharging that campaigners say took place in 2004-05.
    Ms Hillier, Labour MP for Hackney South and Shoreditch, says: “I am very concerned about the information provided to me by The Times about possible overcharging by npower going back to 2004-05. It is very important that consumers can have confidence in the accuracy of their energy bills. I hope npower will take these concerns seriously and I will be raising the matter with Chris Huhne, the Energy and Climate Change Secretary.”
    Meanwhile, Edward Davey, the Consumer Minister, says: “I was pleased to see how well the refund from npower worked recently but obviously it is concerning if there was another occasion where customers have been let down. I will speak to Consumer Focus about this issue.”
    Andy Beck, a semi-retired bathroom installer from Teignmouth, in Devon, who has spearheaded the campaign for redress, says: “I used to be an npower customer until 2008 and have kept all my gas bills right back to 2004. It is quite clear that, for the year April 2004 to April 2005, I, and many other people, were overcharged for our gas supply.”
    Back in 2004, as now, npower operated a two-tier tariff for gas customers. It undertook not to charge more than 4,572 units at the higher rate. But Mr Beck’s bills show that in 2004-05, as in 2007-08, npower did charge him for more units at the higher rate.
    He says: “For the year April 1, 2004 to March 31, 2005, I was charged 5,470 units at the higher rate — an overcharge of 898 units on the maximum permitted figure of 4,572.”
    The difference between the lower and higher rates in 2004 was 1.43p (2.98 minus 1.55) so the overcharge in Mr Beck’s case was 898 multiplied by 1.43p, or £12.84 (£13.48 after adding VAT).
    Mr Beck says: “I took npower to court in October 2008 and included this figure as part of my court claim, along with £88.21 for the 2007-08 overcharging. I also included more than £1,000 for npower’s failure to explain its charging methods, plus court costs and expenses, and my claim of £1,375 was settled in full.
    “Had npower wished to challenge my claim for overcharging for either of the two years it could have done so in court — but it didn’t.”
    He adds: “I think it is very important that people realise that the overcharging that took place in 2004-05 followed a very similar pattern to that of 2007-08.”
    One potential problem that those wishing to make an overcharging claim for 2004-05 might face is that there is normally a statute of limitation of six years on such claims. Since npower’s change in the method of charging which resulted in the alleged overcharge took place on October 1, 2004 — more than six years ago — customers seeking redress today might find themselves “timed out”.
    But John Hill, an npower gas customer who, like Andy Beck, brought a successful legal claim for overcharging against the energy company, believes consumers seeking redress could make use of an exemption clause.
    Mr Hill, a radio engineer from North London, says: “I think this limit would not apply in this case, because there is a lifting of the limit where a relevant fact has not been disclosed. I would argue that npower did not properly disclose its charging structure in 2004. In fact it did not do so until the summer of 2008.”
    An npower spokesman says: “We believe that the years 2004-05 and 2007-08 are completely different cases. In 2007-08 we made two changes to the way we charged for our higher-rate units. In 2004-05 we made only one change.” He adds: “As for the question of time limits, it would be for customers to determine whether they were within the six-year time limit and whether there were any exceptions to this.”

    Meanwhile, Mr Beck has urged the 1.8 million people scheduled to receive a payout for 2007-08 to check their refund letters carefully.

    He says: “In npower’s statement of October 1, announcing it would be making special payments to gas customers, it says: ‘We plan to pay to customers the maximum they could have incurred from any excess’. But I have already come across at least one customer who reckons he has not been refunded the full amount that he was overcharged.”
    The customer, from Newcastle upon Tyne, has kept all his bills dating back to 2004. Mr Beck has looked at these bills and worked out that the 12-month period when the maximum overcharging took place was between March 1, 2007 and February 28, 2008. Over that time he was charged for 6,905 units at the higher rate — 2,333 units more than the stated maximum of 4,572.
    Mr Beck calculates that npower overcharged the customer by between £90 and £100. But the refund the customer has now received was for just £61.95 including VAT He says: “I think npower should come clean about how precisely it is calculating people’s refunds. I think all npower customers who receive a refund should scrutinise the amount being offered. Where they are in any doubt about the correctness of the figure, they should challenge npower to give a clear explanation of how it was worked out.”
    An npower spokesman says the refund calculation is made over a 12-month period starting from the anniversary of the month in which the customer first joined npower. He says: “In this particular case the customer’s anniversary month was January, so we are making our calculations from January 2007 to January 2008. We are confident that our calculations are correct. When we talk about a maximum amount we mean the maximum within a 12-month period from the customer’s anniversary date. We feel we have treated customers absolutely fairly and have created a level playing field with our method of calculation.” But Mr Beck says: “This is a rather cavalier interpretation of the word maximum. If npower says it will pay customers the maximum they could have incurred from any excess then it should do just that. This anniversary month argument means that the refunds become a complete lottery. Only those fortunate enough to have joined npower in March will actually receive the maximum possible refund.
    “I reckon that npower could save itself millions of pounds in refunds by using this method of calculation.”
  • Yep, thats slightly clearer on the anniversary date issue. Thats very wrong!

    Anniversary dates are used because they allow you to see when the tier 1 ends and the next years tier 1 begins. In reality when it comes to recalculating bills, it just means that you do a calculation of each year seperately.

    If all they are doing is doing it from the anniverasary date, any pro rata months prior to that will be lost and they will be saving themselves millions.

    It seems they are still trying to sneak out of this situation.

    I don't agree that the time limit is valid either. Npower & Ofgem spent a long time doing wishy washy things and trying not to refund anything. In that time all thhey did was try to delay past the time limit.
    :rotfl: It's better to live 1 year as a tiger than a lifetime as a worm...but then, whoever heard of a wormskin rug!!!:rotfl:
  • Using a customers start date as opposed to 1st April will be a much cheaper option for them. As you point out it is not clear how they will do this for customers whose start date falls between May and Nov. These accounts will require two calculations and we will have to wait and see if this is being done.
    Perhaps not;) although until someone manages to get from them their formula it remains a lottery...

    I have been playing with the spreadsheet again (I was bored :p) and used my anniversary date. While I signed the contract in Nov 98 my supply was actually transferred 16th Feb so I use that date...
    I found that for the year 07/08 while I claimed for an overcharge of 1837 units, by changing the date to feb instead of april this became 2537 units overcharged.
    Curious I did the same to the 04/05 issue and found this changed from the 696 I claimed to 1039.

    My view is until their method/formula is exposed for all to see they are still extremely vulnerable to anyone who lodges a claim against them. Even if they did publish this I doubt it would support their position.

    I strongly suspect anyone who does so will come out with significantly more than they would get from this current deal.
  • Terrylw1 wrote: »
    I don't agree that the time limit is valid either. Npower & Ofgem spent a long time doing wishy washy things and trying not to refund anything. In that time all thhey did was try to delay past the time limit.
    In all the dealings I've had they always claim they notified customers of the price rises. The basis of my claim was they never told us how these were applied to the units of energy (at least until Nov 08 in my case). As such it was (and still is in relation to the change in Oct 04) a deliberate act of concealment. This renders the section on the back of all the bills 'how to calculate your gas' (or suchlike) is meaningless as the customer never had the information required to do this for themselves. Because of this the usual 6 year time limit does not apply (IMHO).
  • alleycat`alleycat` Forumite
    1.8K Posts
    Part of the Furniture 1,000 Posts Combo Breaker
    Thank you. I am pleased you have received a payment. However I am not convinced they are being calculated fairly.

    If we look at their explanation of how these payments will be calculated it is not clear to me how they are doing it.

    The first sentence seems quite straightforward. We know that the period when the maximum possible number of higher priced units could have been charged is the twelve month period of 1st March, 2007 - 29th Feb, 2008. It was possible for a customer to be charged 6820kWh, some 2248kWh over the 4572 maximum. Also, using npowers own tables we know that for the period 1/3/07 - 29/2/08 the 4572 maximum was reached on 14/12/07. Therefore the excess units would be charged after this date. There was a price increase on 4/1/08 resulting in a large differential between the higher and lower priced units.

    The second sentence is much less clear. They are comparing 4572 with which 12 month period. The 12 months where the maximum overcharge occurred? The 12 months around the changes? There were two such changes , 1st May and 1st November, 2007. Or are they using the anniversary date the customer joins npower?

    The third sentence appears straightforward, but read on.

    I have recently seen the bills of a customer who has been compensated under this scheme.

    The customer was with npower for a period that straddled the periods of these changes and the period of highest charging, by a large margin

    I calculated the additional cost of overcharged units for the year 1/3/07 - 29/2/08. In this case npower had charged even more than the theoretical maximum of 6820 and the additional cost came to over £92.00 incl.VAT. Interest should also be added to this.

    The actual compensation received from npower was just over £60.00 incl. VAT and interest.

    Curious as to how this discrepancy was caused I made enquiries. They reveal that npower had calculated using the following method. To be fair I haven't seen their calculations but believe this is what they did.

    They took the customers starting date which was at the beginning of January.

    From that date they calculated on a daily basis (I have no idea how) the amount of units overcharged and applied the applicable price differential until presumably the end of December 07.

    They totalled the cost, added VAT and interest at, I believe, an interest rate of 6.6%. Bingo.

    It seems to me that they are out to save themselves a lot of money using this obscure method.

    By calculating the overcharge on a daily basis from the customers anniversary date they are in this example, using the lowest price differential between then and 30/4/07. At this point the 4572 had not been reached and there was therefore no overcharging to calculate.

    This will also reduce the no. of overcharged units available to be costed at the next highest price differential which was from 1/5/07 -3/1/08.

    Clearly they have not taken the period the maximum possible number of units this customer could have been charged. Neither are they using the appropriate price differentials.

    It would appear that if this is the way npower are approaching payment calculations then it is most unfair.

    Using their method a customer who joined on say 1st November, 2005 and remained with them until after February 2008 could have a maximum overcharge of 2248 which cost them over £90.00 but only receive payment for 1024 overcharged units. About £26.00 plus interest.

    I would suggest anyone who has their bills check the refund is correct.

    My view is that the precise amount npower overcharged each customer is exactly what they should be returning to each customer.

    DD i agree that the way they are doing it looks odd.

    I received a gesture of goodwill, what feels like years ago, as to the value i believed they'd overcharged me based on the previous epic thread on the subject.
    This latest "offer" amount is less than that value.
    I haven't argued too much about this as I'm in essence getting a second bite.

    I'm putting this "new" value down to a "time and effort" re-credit rather than a true refund.

    I'm so "over" dealing with NPower i don't even like giving their name Oxygen and i've put a line under it.

    I'm sure if you type "shipment of fail" into google images you'd soon find a picture of NPower.
  • dizzyblonde82dizzyblonde82 Forumite
    467 Posts
    Part of the Furniture 100 Posts Combo Breaker
    I received a letter today with a refund payment of £66.73 from 2007 charging error, I wasn't expecting a refund and haven't got the old bills but the refund couldn't have come at a better time as DH recently changed jobs and his pay dates completely changed.
  • I received what I thought was another junk mail letter from npower this morning. I was about to bin it when by chance i noticed an amount of money mentioned and decided to have a closer look. It stated I was owed £54 and to claim it had to take 2 proofs of ID to the post office, A nice surprise but I can't help thinking that it should have been in an official looking envelope and not one of the junk mail ones. Are they trying to make them look like junk so we throw them out, never claim and they save loads of money. Why not take off our next bill or send a cheque? Beware!
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