The money will directly benefit “vulnerable consumers”, Ofgem said.

npower was fined for breaching rules when selling products. The regulator’s investigation centred on the sales processes and information used by the energy company when customers were making decisions about whether to switch supplies to npower.

Ofgem said these shortcomings have been “fully remedied”.

Ofgem’s senior partner in charge of enforcement Sarah Harrison said:”npower has done the right thing by stepping forward and recognising that, whilst it was making changes to improve its sales processes, weaknesses remained which affected consumers’ ability to compare supplier offers fairly.  These issues have been fully addressed by npower and Ofgem welcomes the company’s actions and its agreement to pay £3.5m to directly benefit vulnerable consumers.”

npower will make a payment of at least £25 to each of its current customers who receive Warm Home Discount payments. 

Paul Massara, npower’s CEO, said: “We’ve worked very closely with Ofgem as they’ve investigated these previous issues. It’s good to draw a line under this, so we can focus on our goal of becoming number one for customer experience by the end of 2015.”

npower will write to all customers who may have been affected by the breaches, to outline the measures it will be taking.