Npower has admitted it has not paid corporation tax in the UK for three years, saying it has invested "billions" in new power stations and wind technology.
RWE npower's chief executive Paul Massara told the Energy and Climate Change select committee that the company had not paid corporation tax after he was asked by Labour MP Ian Lavery if he could confirm how much it had paid in 2009, 2010 and 2011.
Mr Massara said: "So we will not have paid corporation tax in those three years.
"Effectively we have invested £5 billion in the last five years building power plants, creating jobs, creating employment and helping to keep the lights on.
"If we had not made that investment we would not have the deductibility that we would be allowed. That is a simple accounting UK rule."
Npower increased gas prices by 8.8% and electricity by 9.1% in November. The company reported a 34% rise in profits to £413 million last year.
The admission came as the "big six" energy companies were questioned by MPs over topics including profits and how they treat their customers.
In a statement following Mr Massara's admission, the company said: "Since 2008, RWE has invested around £5 billion in the UK, including two new gas fired power stations and wind technologies.
"Looking at RWE npower specifically, our investment programme since 2008 has amounted to almost £3 billion, which means we have seen a large increase in tax relief. This, combined with the losses in our retail business for 2009 and 2010, reduced our taxable profits to the point where we paid almost no corporation tax. We do however pay substantial employment and property taxes (business rates).
"This is in no way tax avoidance, and all of our business is taxable in the UK. We've not paid corporation tax because we've been investing hundreds of millions to keep the UK's lights on."
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