Energy firms face legal action over brokers’ “secret commissions”

Commissions for brokering business energy contracts with suppliers have allegedly been added to bills without businesses being informed by their providers

Small businesses have allegedly fallen victim to “large hidden” commissions of brokers.

It comes as London law firm Harcus Parker sent a letter before action to British Gas in the first step in group litigation to reclaim undisclosed commissions which were allegedly paid by suppliers to brokers without customers’ knowledge.

The law firm has already written to a number of other energy suppliers, including E.ON and SSE, on behalf of “several hundred” clients.

Small- and medium-sized businesses, schools, faith groups, charities, sports groups, care homes, local authorities and other community organisations are all said to have been targeted by brokers who have allegedly added “large hidden” commissions to customers’ bills.

Ofgem is currently undertaking a review into the non-domestic market more generally, which will include broker and third-party issues – it will also work with the government to explore further protections where needed as a result of the review.

Damon Parker, Senior Partner of Harcus Parker, said: “Huge numbers of organisations are unknowingly paying more for their energy than they should because many suppliers increase the cost to their customers to pay secret commissions to rogue brokers. Every bill a customer pays then included an element of this hidden commission.

“I am told that some brokers deliberately target organisations which are seen as being less sophisticated, including faith groups, village halls, schools and care homes. We would particularly encourage members of those organisations to try to find out if their bills have been inflated in this way. They cannot know until they check.”

A second law firm, Leigh Day, is looking to attract similar potential claims.

Oliver Holland, Leigh Day Partner, said: “We believe that there are clearly grounds for a claim by businesses against the energy companies for charging their business customers the commissions without telling them that they had been added to their energy bills.”

UKHospitality Chief Executive Kate Nicholls, said: “With margins so tight in hospitality, yet another threat to vulnerable businesses will prove too much for some. Transparency and fairness need to quickly be instilled from the onset of the negotiation process and remain throughout if more business failures are to be avoided.”

A British Gas spokesperson told ELN: “The relationship between a broker and a business customer is separate from their relationship with British Gas. All brokers operating in the market are expected to ensure that their terms and conditions comply with the relevant regulatory obligations on transparency.

“We offer business customers competitive prices if they come to us directly and we have complied with the regulation regarding transparency disclosures at all times. Customers can also ask their broker at any time regarding the commission they are charging and we would encourage them to do that.”

An Ofgem spokesperson said: “We recognise the harm that can be caused to small businesses when they are not made fully aware of how much they could pay within their energy bill to a third-party energy broker.

“That’s why we introduced a new requirement last year for energy suppliers to set out clearly, in the terms and conditions of microbusiness customers’ contracts, any money paid to third parties. This clarity will help small businesses make a fully-informed choice about their energy contract.

“In December we also introduced a new requirement for energy suppliers to work only with brokers accredited with an Alternative Resolution Scheme on microbusiness customers’ energy supply contracts. This accreditation makes it easier for small businesses to resolve any issues that might arise with third-party brokers.

“We are also undertaking a review into the non-domestic market more generally and won’t hesitate to introduce further protections where needed.”

ELN has contacted E.ON and SSE for comment.

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