Energy regulator Ofgem yesterday launched an investigation into Npower, following allegations of misselling, which include signing up customers to energy supply contracts without their knowledge.

Ofgem said it had started investigating "a potential breach by Npower of its licence obligations relating to marketing activities".

Under the licences issued by Ofgem, gas and electricity suppliers must have "appropriate procedures" for selecting and training sales staff, make customers "fully aware" when they are entering into a supply contract, and contact the customer within 14 days to confirm they are happy to proceed.

Ofgem said its decision to investigate "follows recent allegations that Npower sales representatives have been mis-selling energy contracts to customers".

An investigation by the Sunday Times alleged that Npower staff made customers sign a form without revealing it was a contract, exploited people with poor English, lied about standing charges and pretended to be from "the electricity board". The newspaper alleged an Npower salesman, who claimed managers were aware of the tricks he used to win customers, admitted to persuading people to sign contracts by telling them they were only requesting more information.

Npower said yesterday it would "co-operate fully" with Ofgem's investigation. The company, owned by RWE of Germany, said: "We were very concerned at the actions of a small number of individuals in a London sales team as reported in the Sunday Times.

"We took swift action to take the team off the road and investigate the problem. Following an in-depth investigation by our audit team, disciplinary hearings have been scheduled for later this week. We cannot prejudge the outcome of these meetings but the penalty for fraudulent activity is dismissal."

Npower said it had also taken steps to confirm that its systems for vetting sales teams were working effectively.

Adam Scorer, director of campaigns at consumer group Energywatch, said it had written to Npower and Ofgem with details of more than 400 cases where consumers had complained about the company's sales tactics. "With the evidence suggesting Npower's sales staff were caught red-handed bullying, deceiving and harassing consumers, an example must be made of them," he said.