Ofgem has warned energy giant Npower to resolve its billing problems by the end of August or halt telephone sales to new customers.

The regulator said Npower must meet monthly targets to cut the number of accounts affected by late ­billing from about 400,000 currently to 100,000 over the next three months or stop all proactive telesales activity.

Ofgem has also opened an investigation into Npower's "prolonged customer service failings". It warned that Npower could face a financial penalty or redress payment if it was found to have broken rules.

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Earlier this month Npower said it would no longer send bills to customers who left the company more than six months ago if it was to blame for the delay.

The move followed reports of households switching away from Npower only to receive bills months or even a year later.

Sarah Harrison, Ofgem's senior partner in charge of enforcement, said: ­"Npower's recovery plan has not delivered as far and fast as is necessary."