Profits at npower have tumbled 60% as it struggles with billing problems which have sent customer complaints soaring.
Many customers have been receiving late bills or no bills at all, since npower introduced a new billing system in 2013.
Npower, which is owned by the German utility RWE, revealed on Thursday that it had lost more than 300,000 customers over the past year, with many remaining customers using less energy.
The company, which is one of the UK’s largest energy suppliers, does not expect to solve the billing problems until the end of 2016, despite last year’s warning from the regulator Ofgem to fix the issue by August 2014 or not take on new customers.
The company insisted it was taking the right steps and said complaints had fallen to the lowest level since December 2011.
At one time, hundreds of thousands of people were left unsure of how much they owed, which prompted Ofgem last month to rule that customers who had waited more than 28 days would get free energy until the problem was solved.
The Ofgem investigation, which began over a year ago, is continuing and could also lead to fines.
Npower was one of the most complained-about energy companies in 2014 and 2013, with customer problems still running high in the first half of 2015. The consumer watchdog Ombudsman’s Services reported in June that the majority of energy market complaints related to npower and Scottish Power, although the number of consumers contacting the ombudsman has fallen since the start of the year.
Npower blamed billing problems for a 60% fall in UK profits: the company earned €53m (£38m) in the first six months of 2015, compared with €133m the year before.
“The main part of our drop in profits has been due to the continued impact of the systems issues that hit our domestic business last year,” the npower chief executive, Paul Massara, said.
“The challenges that we have faced were tougher than we expected but we know what the problems are and are taking the right steps to fix them.
“Already this year, we’ve made real improvements for our customers, halving the number of complaints we receive, meaning complaints are at their lowest level since 2011.”
RWE revealed in its half-yearly report that it was “often only able to retain residential customers with expired contracts by offering them new contracts with more favourable conditions”.
The billing saga is a another headache for RWE, Germany’s second-largest utility company, which is grappling with low prices for the fossil fuels that dominate its business model.
RWE has a relatively small renewables business – 6% of annual electricity production – meaning it benefits less from favourable policies to promote renewable energy.
The energy giant said it was experiencing a “crisis in conventional electricity generation”, amid declining gas and coal prices. Coal prices have been falling because of a slump in demand from China, dragging down the price utilities can charge for electricity across Europe.
Gas prices, which closely track oil prices, have also fallen, offsetting stronger demand that came from colder temperatures in 2014, compared with the previous year. In Germany, gas prices are down 1-5% and in the UK by 4-8%, prompting npower rival British Gas to announce a 5% cut in prices.
RWE pointed to the low price of power, as well as problems in the UK, as it unveiled an 11% decline in profits to €2.03bn.
This “significant underperformance” on market expectations made it the worst performer in the energy sector, according to analysts at RBC Capital Markets.
In a letter to shareholders, RWE chief executive Peter Terium also complained about the German government policy to phase out the most-polluting coal-fired power stations.
Berlin wants to phase out lignite by 2021, although it was criticised by the Greens for abandoning plans for a climate change levy on the lignite-mining industry of the Rhineland.
Terium said the debate over lignite made RWE “look like a football team that has been forced on to the back foot and robbed of its ability to play a free-flowing game”.
He added that the company was continuing to embark on growth projects, listing electricity supply in Slovenia, building up electricity and gas business in Poland and Hungary, as well as expansion of its renewables business via offshore windfarms.
