Npower has until August to solve its long-term billing system problems, otherwise it will be banned from telesales marketing for new customers.
Industry regulator Ofgem has secured commitments from npower to "take immediate action" to put right its billing and complaints issues, alongside launching a wider investigation into customer service at the company.
The promise came after the energy company earned the title of most complained about energy firm last year after its botched SAP implementation, which started three years ago. In 2013, npower received almost 1.4 million complaints, one for every four customers.
Disruption to customer-facing systems surfaced following a migration from legacy in-house systems onto the SAP platform, orchestrated by IBM in 2011. Many of npower's 5.4 million customers began to experience billing delays, cancelled direct debits and some customer's accounts were never set up.
Last month, an npower spokesperson said, "We have been working really hard to resolve the issues we have seen with the system so have used specialist teams to work solely on this project. We've made significant progress as the majority of issues have now been fixed and the remainder will be sorted within the next couple of months."
Now, Ofgem is requiring npower to resolve major billing issues no later than the end of August 2014, and publish monthly progress updates on its website. Failure to meet monthly targets will result in npower ceasing all proactive telesales to new customers until they are met.
The parallel investigation into npower's customer service failings is the first case to be opened under Ofgem's new Standards of Conduct (SoC), and could lead to a financial penalty or redress payment if Ofgem is found to have broken rules.
Sarah Harrison, Ofgem senior partner in charge of enforcement, said, "Npower customers have suffered service failures for too long, that's why Ofgem has secured binding commitments from npower to reduce its bill backlog or face curbs on sales, alongside launching a wider investigation under Ofgem's new Standards of Conduct."
She said, "Ofgem has been monitoring npower's service closely and we have been increasingly concerned about the slow progress to tackle failings. Npower's recovery plan has not delivered as far and fast as is necessary. Our analysis of complaints data also raises some serious concerns which will be thoroughly examined in our investigation."
Ofgem says there has been some progress since its first npower intervention in December. It says longstanding problems in relation to new customers and the setting-up of direct debit payments have now been tackled, and that many of the oldest cases of late billing have been cleared.
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