The Business Energy Claim Scandal

Hidden commission has robbed UK companies of billions and it’s time to fight back, says Case to Answer’s Group Commercial Director Jeff Hudson.

The cost-of-living crisis has been a double whammy for businesses facing an average energy cost rise of 250%. A significant proportion of them have already lost thousands through mis-sold energy deals.

Small businesses alone are said to have lost £2bn a year through rogue “energy brokers” locking them into poor value contracts. It has been widely reported that over 90% of micro businesses (with less than 10 employees) have been victim to mis-selling by a broker on some level.

The most common ways in which businesses have been mis-sold energy include:

Only being offered one deal even though they’ve been promised a full-market comparison.
Hidden commission fees not disclosed or documented in the contract.
Being locked into contracts lasting several years without being informed at the point of sale.

Ofgem has now stepped in with rules to safeguard microbusinesses from being at future risk from previously unregulated brokers. These state that commission applied to energy rates must be fully disclosed and businesses must give their informed consent. They must also be given a 14-day cooling-off period after signing on the dotted line.

However, these rules have only just come into effect and do not protect larger companies.

There is still a lack of wider regulation and mis-selling claims apply to the entire industry, with companies of all sizes eligible for compensation.

Jeff Hudson said: “If a business in the UK has sourced its energy via an energy broker, the likelihood is they’ve been paying increased energy rates.

“It has been common practice for energy brokers to add a commission to a business’s energy contract without fully disclosing its existence. As a result, a business that has obtained energy through an energy broker may be able to have their energy prices reduced and reclaim this commission from the broker. It could be that they are owed thousands. In fact, we’ve seen one deal where a business had paid commission of £900,000.

“In the majority of cases, the business won’t know this has happened because they haven’t got any documentation. They may have been sold the deal through a phone call or email. Often, they won’t even know a broker has been involved because they’ve presented themselves as an agent of the energy company.

“These brokers have purported to be procuring the best deal for their clients, whereas in reality they were procuring the best deal for themselves and breaching best practice.”

Jeff warned this is still happening now. When it comes to tactics used to apply undisclosed commission, he explained: “The decks are rigged from the start. If the broker has a dealership, they know all the tariffs and can tell the client they’ve obtained five different quotes. The client thinks they’ve contacted them all separately. Instead, they’ve added commission to the rates they’re relaying to them but haven’t disclosed it. It’s not unusual for this commission to be 30% and the client has no idea.”

Jeff continued: “Perversely, it’s a lot more difficult now than it was for businesses to know if they’re paying a lot more than they should be because energy prices have risen. It might be that where a broker has made a fortune in commission out of them. A new deal now is dearer even without that commission.

“But that’s not the point. If a huge commission wasn’t declared, it’s just by pure chance it would be cheaper than now because energy rates are so high. The point is that the client’s deck was rigged and it’s unlikely they would have bought an energy contract if they’d known that 30% of it was commission.

“That’s why at Case to Answer we don’t go for rescission, which is putting the client back in the position they were in before the contract was made.”

Jeff countered: “There are some brokers out there who are doing a good job but with the vast majority a lot of undisclosed commission has had a detrimental effect on a lot of businesses. Ultimately, those bills have to be paid by someone, so the cost is passed on to customers and end users; for example, by restaurant owners having to increase prices on their menus.

“Nobody expects anybody to do a job without being paid a fee for it. It’s the way in which the commission has been hidden from the client. The lack of transparency meant they couldn’t make a decision.

“It’s scandalous that this has happened through brokers purporting to act in the best interests of their clients, and Case to Answer has the expertise to redress this.

“You don’t need to be a huge company to come to us for help, we can help any type of business, anywhere, on a no win no fee basis.

“If you suspect you’ve been mis-sold your business energy, get in touch. We will carry out the initial investigations for free.”

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