Ok, as a girl who used to work for npower I will tell you how it all works. I left about 6 years ago so no shouting at me!!!
If you live in normal town/suburbs ie not on a remote farm somewhere you are meant to have your meter read 2 times a year, then the computer can estimate based on the average consumption for your other 2 yearly estimated bills.
DD's or any budget scheme is reviewed after one year of being on it known as your final quarter. Because some people have electric storage heaters they would have a huge credit in summer and then a deficit in winter. Therefore the DD is averaged across the year. Personally I would not want my DD going up and down all the time. But they still send you bills so you can see if you are covering your costs.
Yes you can set up a standing order although the company isn't pro S/O because they have no control. ie they can write to you to request you increase your S/O but then you forget to do it and lo and behold your final quarter bill comes in that has to be paid if there is a large debt and generally people then moan, err hello?? We asked you to increase your payments to cover your consumption. Plus you can reduce it should your bills drop - they are not so quick to ask you to lower the payments
CHECK your meter readings, it only takes 5 minutes, if it is an estimated bill and the reading is pretty spot on STILL ring up with the reading. This means that in future should there be any further estimates the computer has actual readings to base consumption on meaning your bills are more accurate.
I tended to find that everyone under-estimated what they use electricity wise. When talking through a bill with someone we would start in their kitchen. Fridge freezer plugged in and running 24/7, kettle, toaster, microwave (usually left plugged in with time showing) dishwasher, radio or tv, washing machine, tumble drier, lighting, then generally - hoover, electric shower, electric pump on gas central heating in the lounge - TV, sky, dvd player, computer(s), lights again, cordless phone, mobile phone charger(s), then the bedrooms, clock radios, tv, stereo, hairdryer usually 1600w straightners, the list goes on. Oh and don't forget what your children have on in theirs.
You plug it in, switch on at the wall its usually electric. Makes you think doesn't it!!!!
I do believe they should have contacted you once they billed that £500 but it would depend what their criteria is set at. I would agree to pay it back on DD at reasonable amount to you.
The argument from them will be that you have to take responsibility for your non-action but equally they should take responsibility for their non-action.
Phew that was long!!