Deleted the .cache/sessions as you suggested and then rebooted, but makes no difference I'm afraid.
Seems that when xfce4-power-manager runs for the first time it isn't initialising properly.
I have 3 workarounds:
1. Change something in settings
2. Run xfce4-power-manager --restart
3. Use the indicator icon to set Mode -> Normal
I wonder what these have in common.
I notice (from reading xfce bug 6515) that setting "Nothing" will "send DPMS off signal to the screen if no external monitor is connected". Perhaps, in my case, it thinks I have an external monitor connected first time through. Wonder how I debug this.