Energy Brokers and Hidden Commissions

November 3, 2022

Energy Brokers and Hidden Commissions

Does your business have a claim?

  • Undisclosed commission payments can add to your energy bill.
  • The more energy used, the higher the commissions earned.
  • Check whether you were aware of commissions being paid.

Businesses often use brokers to get the best deal on their energy contracts. These brokers receive commission from the energy companies for customer introductions, and these commissions are usually added onto a customer’s monthly bill – but customers are rarely, if ever, aware that this is the price of doing business with brokers.

If this is the story of your business, you may have a very good claim for compensation from the broker or even your energy supplier.  

Here’s why:

Energy brokers – also called Third Party Intermediaries (or TPIs) – try to attract new customers with the promise of lower energy bills. With their in-depth energy market knowledge, TPIs can actually provide an invaluable service to businesses looking for savings, particularly against the backdrop of rising energy costs.

However, TPIs in the business market are currently unregulated. Questionable practices have begun to emerge, particularly around commission payments. This concern, amongst others, led regulator Ofgem to launch an investigation into the business practices of TPIs in 2021.

Ofgem concluded that many TPIs lacked transparency about the commission they receive. TPIs are either not mentioning the commission aspect to customers or are saying that their services are free of charge.  

Where commission is mentioned, the details are invariably in the very fine print of a TPI’s website; or it is mentioned without going into any detail at all.  

That’s given rise to a situation where businesses may, without realising it, be paying commission to TPIs on a monthly basis as an uplift on the price per unit charged on the energy, i.e. they’re paying an inflated price when they were promised the best possible price.  

Ofgem also found that the majority of businesses instructing TPIs are unaware of the commercial relationships between TPIs and energy suppliers. The assumption is that TPIs are acting in their best interests, rather than directing them to the energy supplier(s) which will pay the TPI the highest rates of commission. Sometimes, TPIs encourage businesses to commit to energy contracts with less favourable terms because the commission is greater.

For those businesses that have used an energy broker that didn’t make it clear at the time how commission would be charged (or even, that commission would be charged at all), there is now a prime opportunity: you may have a claim against the broker for the whole amount of the commission plus interest. Why? Because the broker was your agent and should have always acted in your best interests. Failure to do so gives rise to a claim.

Early claims suggest that there is significant potential for compensation.  For example, Windermere School in the Lake District brought a claim against its energy broker for £200,000.00 and claims as large as £1.8m have been seen.  

If you have used an energy broker in the past, it is certainly worth considering making a claim. Note too that you can also bring claims against energy suppliers, which will be useful to some potential claimants in cases where the broker may not be an easy target or may no longer be in business.

If your company has changed energy contracts within the last six years, then be sure to check the terms of the new energy contract and any contract with the TPI used.

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