The UK's energy regulator hit the 'Big Six' firm with the huge fine as it had broken rules to do with doorstep and over the phone sales.
Ofgem claimed a number of weaknesses in npower's sale processes meant customers were not being offered an opportunity to compare prices and offers from other energy suppliers over the period from 2010 to 2012.
The 'Big Six' energy firm also failed to provide sufficient information on energy usage and gave inaccurate details to some customers about their Direct Debit payments according to Ofgem in a statement.
However, the regulator has said it now believes npower to have fully remedied all the previous issues raised and the money will now go towards helping a number of 'vulnerable customers'. At least £25 will go towards each of its Warm Home Discount customers according to npower.
Ofgem senior partner in charge of enforcement, Sarah Harrison, said: "Ofgem will continue to hold companies to account to ensure rules to protect energy consumers are met and that the market works for consumers in a simpler, clearer and fairer way."
npower chief executive, Paul Massara, had no qualms with the ruling.
He 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."
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