Business Energy Claims has submitted a damning body of evidence to the Department for Business, Energy and Industrial Strategy (BEIS) on the role of Third-Party Intermediaries (TPIs), also known as Energy Brokers, in the energy market.
In its consultation document, BEIS noted that ‘business customers use TPIs such as brokers to support with energy procurement and contract negotiation’ and has ‘committed to consult on regulating TPIs, with a view to ensuring the regulatory framework adequately covers the wider market.’ It asked for evidence of ‘customer harm’ from TPI activities.
Business Energy Claims has an industry leading team of energy and legal experts helping businesses to recover hidden commissions and losses from the mis-selling of energy contracts.
Since 2018 it has worked to help businesses that have been mis-sold energy by an Energy Broker and has been collating information of unethical practices. It used this experience to submit a comprehensive report to BEIS, which included real-world case studies of nefarious ways of operating.
Energy regulator Ofgem, which was supported by Business Energy Claims for its investigation into the practices of Energy Brokers, believes more than two million microbusinesses use an Energy Broker. Business Energy Claims experience shows that more than 90% of business energy contracts that have been sold by an Energy Broker have been mis-sold. This equates to an estimated hundreds of millions of pounds of additional costs at a time when many sectors are still struggling from the effects of the pandemic.
A key question asked by BEIS was ‘Are you aware of any contracting or sales practices by TPIs that cause harm (or risk of harm) to business customers? If so, to what extent and why?’
Business Energy Claims responded that ‘Throughout normal business activities, Business Energy Claims has identified five distinct ways in which TPIs are causing harm to business customers, with varying degrees of illegality, from failure to disclose hidden commissions to serious misconduct and fraud. Based upon analysis of its current caseload, it has brought claims on behalf of approximately 40 different business sectors. The claim value for these sectors ranges from approximately £1,200 to £1,800,000, clearly demonstrating harm to businesses as direct cause of TPI sales practices…’
Business Energy Claims was able to provide evidence to BEIS of a range of consumer harm seen, providing details of some instances where this has occurred. These included:
- A social club received a telephone call to discuss their contract whilst the club’s representative was rushing to hospital. Despite being informed of this, the Energy Broker persisted and pushed the social club into having the conversation, ultimately gaining permission to enter into a gas contract whilst they were demonstrably pre-occupied. The commission totalled £22,700.
- A large retail client agreed to pay an Energy Broker a monthly commission directly, which they were consequently told would be the only commission received by the Energy Broker. The client has also been paying a secret commission built into each of the 200+ contracted sites unit rates. The total commission totalled approximately £1,800,000.
- A care home directly asked the second Energy Broker they engaged with about their commission and asked for all the information relating to the commission they would receive to be disclosed to them. The Energy Broker initially avoided answering the question and then failed to disclose any information regarding the commission at the point of agreeing the contract. The total commission totalled £17,000.
Callum Thompson, chief executive of Business Energy Claims, said: “We have been highlighting this issue for a number of years now and finally it is starting to be taken seriously.
“We have a substantial number of examples of mis-selling in many forms, all of which impacting the
customer significantly.
“In addition to providing evidence to BEIS, we have submitted a proposal that full disclosure of commission at the broker level is provided, a comprehensive supplier price list is provided, and fact sheets on contracts are provided to all business customers so an informed decision can be made.
“We also believe that verbal contracts should be replaced in favour of digital documentation or written contracts. There should be no ambiguity with the clients around what is being offered and commercial arrangements between Energy Brokers and suppliers should be completely transparent.
“There are around 3,000 Energy Brokers in the UK and more than 40 suppliers so openness is paramount. In our experience, and that of our clients, this is currently not happening, hence our average claim is around £25,000.
“We sincerely hope that BEIS takes on board our evidence, and the experiences of our clients, and brings in the necessary legislation to regulate the sector to make it fair, open and honest.”