For businesses that engaged an energy broker without clear disclosure of commission terms, there may be grounds for legal action. Energy brokers are considered agents and are expected to act in the best interests of their clients.
Failure to do so may give rise to claims for the entire commission amount plus interest. Noteworthy claims, such as Windermere School’s £200,000 case, highlight the significance of scrutinising past dealings with energy brokers and for brokers to disclose and be transparent about any commissions they receive.
Energy brokers, often seen as allies in reducing businesses’ energy bills, have faced scrutiny for their deceptive practices, particularly in masking commissions.
The energy broker process begins with brokers forging relationships with energy companies, and establishing exclusive agreements or preferential treatments. When engaging businesses, brokers position themselves as trusted advisors, carefully recommending contracts that yield personal financial incentives for the broker.
Crucially, these commissions are secretively woven into the contract, leaving businesses unaware as they continue to shoulder hidden costs month after month.
Businesses may face a hidden financial drain when customers sign contracts without knowing that brokers earn commissions. These commissions, received from energy companies, are quietly included in overall contract prices, going unnoticed by unsuspecting businesses. This highlights the importance of being vigilant when dealing with energy brokers. It emphasises the need for transparent contracts and a clear understanding of the broker-provider relationship to protect businesses from unknown financial burdens.
Energy brokers, often referred to as third-party introducers (TPIs), play a pivotal role in assisting businesses, including schools and charities. However, a lack of regulation in the business energy market has given rise to questionable practices, particularly concerning hidden commissions.
Unlike their counterparts in the consumer energy market, energy brokers operating in the business market face a notable absence of regulatory oversight. This regulatory gap has allowed concerning practices to emerge, prompting Ofgem, the gas and electricity regulator, to launch an investigation into TPIs’ business practices in 2021.
Ofgem’s investigation revealed a lack of transparency among many TPIs regarding the commissions they receive. Customers may not be informed about these commissions, and in some cases, TPIs claim their services are free. Alternatively, commission details may be buried in the small print or vaguely mentioned without providing substantial information.
Ofgem’s findings indicated that a significant number of businesses using TPIs are unaware of the commercial relationships between these brokers and energy suppliers. This lack of awareness may lead businesses to believe that TPIs are acting in their best interests, unaware that TPIs may direct them to suppliers offering higher commission rates. In some instances, TPIs may influence businesses to enter less favourable energy contracts, prioritising higher commissions over client benefits.
