On one occasion I let loose with an arrow just as a companion jumped in between me and the target. It was as if the arrow just disappeared. So, in that case, it seemed that the power worked.
But just now while battling a bandit chief I purposefully whacked my companion with my sword to see what would happen. She cried out as though she were hit and she caught on fire (the sword has a fire enchantment). I didn't see anything happen with her health meter though. So I can't tell if I did or did not damage her.
What have you seen? Does it really work as advertised?