Ofgem urged to tackle energy brokers exploiting small firms

Business groups urge Ofgem to Address Energy Brokers Exploiting Small Businesses

In a bid to tackle the issue of rogue energy brokers taking advantage of small businesses, a coalition representing one million enterprises is pressuring the energy regulator, Ofgem, to take action. These brokers have been accused of burdening firms, charities, care homes, and faith groups with hidden commission fees amounting to billions of pounds, significantly inflating their energy bills.

The group of business organizations has written a letter to Ofgem, calling for mandatory disclosure of the fees paid by gas and electricity suppliers to intermediaries marketing deals on their behalf. According to trade associations, these undisclosed commissions have contributed to the escalating cost crisis faced by the small business sector, which employs approximately 13 million people across the UK.

 

Emphasizing the urgency of the matter, the letter stated, "We cannot wait for further reviews on this issue. We have the backing of prominent voices representing the UK's most affected sectors. Should you continue to overlook this exploitation, we will escalate the matter directly with the government."

The Guardian has obtained a copy of the letter, which has been signed by chief executives from prominent organizations such as UKHospitality, Care England, the British Retail Consortium, the Federation of Independent Retailers (FIR), the Association of Convenience Stores, British Independent Retailers’ Association, the Independent Care Group, and the National Council for Voluntary Organisations. The letter's author, Corin Dalby, is the chief executive of energy consultancy firm Box Power.

 

Muntazir Dipoti, the national president of FIR, highlighted the difficulties faced by many members trying to sustain their businesses. He stressed the necessity for Ofgem to take action against these concealed charges to prevent more retailers from suffering significant financial losses.

The issue has also drawn comparisons to the mis-selling scandal involving payment protection insurance (PPI), as expressed in a letter sent earlier to the energy security secretary, Grant Shapps, by the Confederation of British Metalforming.

The Federation of Small Businesses and the British Chambers of Commerce have previously issued warnings that around a quarter of small businesses in the UK are locked into unfavorable energy contracts negotiated during peak gas and electricity prices at the end of the last summer.

Approximately one-third of businesses with energy supply contracts use brokers to secure deals. Unlike intermediaries in the mortgage or insurance sectors, these energy middlemen operate largely unregulated.

 

Harcus Parker and Leigh Day, law firms that have initiated class action lawsuits against energy suppliers, believe that some secret broker commissions may have effectively doubled small business energy bills. They estimate that small businesses could potentially claim up to £2 billion in hidden commissions.

Damon Harcus, founder of Harcus Parker, highlighted the widespread nature of the malpractice and emphasized the importance of transparency regarding the commissions paid by suppliers. He criticized the regulator for failing to address this issue effectively, especially considering its potential impact on companies struggling with fuel costs.

Ofgem, which has pledged for a decade to take action against brokers involved in poor value deals, conducted a review in 2020 and stated that it would require suppliers to disclose broker commissions—but only for "microbusinesses" employing nine or fewer individuals.

 

The coalition of business groups is now urging Ofgem to extend this protection to larger small and medium businesses. In response to the calls for action, Ofgem stated that it had listened carefully and was determined to safeguard businesses of all sizes from unscrupulous energy brokers. The regulator is expected to unveil a comprehensive package of new proposals to address this issue later this week, including immediate actions within its existing rules and potentially seeking stronger powers.

 

Article by The Guardian