Npower's parent company, Innogy, has reported a loss for its UK division, but gained more customers in the first half of the year.
Npower posted losses in underlying earnings of 12m euros (£11m), compared with a profit of 85m euros in 2016.
It also expects the division to make a loss for the whole year and warned of regulatory intervention.
It said cost-cutting helped combat "fierce competition and political pressure" in the UK energy market.
It lost UK customers in the first quarter because of price increases on variable tariffs, but attracted 50,000 new ones with improved deals in the second half.
Innogy said earnings were hit partially because it proved harder to pass higher costs on to UK customers.
"The situation in the UK retail business remains very tense due to the fierce competition and political pressure.
"Measures to reduce costs within the scope of the restructuring programme will help to partially offset negative market effects," Innogy added.
Last month, Ofgem, the energy regulator, proposed a price cap to protect about two million vulnerable customers.
The company said potential price caps were causing uncertainty and a decline in sales to commercial and corporate customers also had a negative effect on earnings.
Innogy, which is majority owned by RWE, has been undertaking a major restructuring programme at Npower after losing thousands of customers because of billing issues and competition from new entrants.
At the end of June, Npower had 4.757 million retail electricity and gas customers in Britain, up 1% from March.
The German company as a whole reported adjusted earnings before interest and tax were 1.7bn euros (£1.54bn) in the first half, in line with expectations.
It was 4% higher than last year owing to earnings growth in the first quarter in its grid business.
Operating profit at its German retail business was 340m euros, up 23% from a year ago.