Thousands of firms join £2bn lawsuit against energy giants

Energy giants paying brokers secret commissions pumped up energy bills for thousands of unwitting small businesses, claims campaigning law firm

UPDATED: Thousands of small businesses have joined a £2 billion lawsuit against energy giants who paid “secret” commissions to energy brokers.

More than 5,000 businesses and organisations have joined the class action lawsuit, aimed at getting compensation for having overpaid for tariffs with energy giants brokered by third-party brokers.

Law firm Harcus Parker says these undisclosed broker commissions were added onto the unit cost of gas and electricity, falsely inflating energy prices for up to two million businesses and organisations in the UK.

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Customers were unaware how much of their energy bill was being inflated by these secret commissions, the law firm said.

Businesses from a wide variety of sectors have joined the claim from manufacturers, high street stores and pubs to community organisations, faith groups and charities.

The average claim for each non-domestic customer currently stands at £5,000.

Research conducted by the campaigning litigation law firm found that one energy supplier offered brokers as much as 10p/kWh in commissions, which were then added to customers’ bills, frequently without their knowledge.

Many suppliers offered brokers secret commissions of between 1-3p/kWh.

Steve Armitage, chief commercial officer of Perse Technology, which owns energy broker Labrador, said this practice had been going on for years:

Armitage said: “When prices are high, those commissions tend to be higher because they’re easier to hide. Ofgem has talked about this issue for many years, but they’ve never acted. It’s been an issue that has never been addressed.”

Damon Parker, senior partner at Harcus Parker, told Small Business: “While there are many good energy brokers out there who act with integrity and transparency, there are others that seem more interested in getting themselves the highest amount of commission possible rather than getting the customer the best financial deal.

“We have found than many of the unscrupulous brokers deliberately targeted small businesses and organisations that they viewed as being less sophisticated energy buyers.”

Last month, Ofgem set out plans to force these secret payments to be disclosed to businesses of all sizes, as part of a wider review.

Brokers have had to disclose their commissions to microbusiness customers, those with a turnover of less than £1.8m, since last October. Ofgem now wants to extend this to all business customers.

Small business organisations including British Independent Retailers’ Association (Bira) and the Federation of Independent Retailers (FIR) previously wrote to Ofgem, demanding it force gas and electricity suppliers to disclose how much they pay to small business energy brokers as middlemen brokering deals on their behalf.

The trade associations claimed that these stiff commissions inflated energy bills, in what they call the “exploitation” of small businesses.

Although Harcus Parker welcomed Ofgem’s recent announcement, Parker questioned why the requirement for all non-domestic customers to be shown how much commission they are paying to brokers was not put in place years ago.

“Ofgem had been aware of the problem of undisclosed broker commissions for a decade and should have acted much sooner,” Parker told Small Business.

In response, energy trade association Energy UK said that the problem lies with unregulated brokers and that the energy industry has long called for regulatory oversight. It supports Ofgem’s recent call for extra powers to regulate brokers themselves. Its spokesman said, “Energy suppliers work to ensure that the intermediaries they use are responsible and competent, and of course there are good brokers that treat their customers well out there. The industry will always seek to work with good brokers that have the highest standards for customers.”

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...