Energy costs can be a substantial burden on a business’s bottom line, especially in the current climate. Between 2021 and 2022, businesses on average experienced a 63% increase in electricity bills and a 124% increase in gas prices. Along with this, thousands of businesses were actually unknowingly paying above the going rate.
Why? Because they fell victim to the undisclosed energy commissions scandal, through no fault of their own.
This is something that has happened to millions of businesses in the UK over recent years, and some still aren’t aware that their finances have taken a huge hit and they could be owed thousands in compensation.
In this blog, we’ll uncover the secrets behind undisclosed business energy commissions and how you might be eligible to claim.
Understanding the energy broker industry
Before we delve into undisclosed commissions, it’s important to understand the role that energy brokers play in the business energy market.
Energy brokers act as the middleman between energy suppliers and business customers. They’re also known as third-party intermediaries or TPIs, and assist businesses in finding the best energy deals, managing their energy contracts and ensuring a reliable power supply.
Essentially, they take the hassle out of the process for business owners who’d rather use their time elsewhere. Of course, they do this for a commission which will either be compensated by the customer, energy supplier, or both.
However, these energy commissions haven’t always been disclosed – or at least, not for the full amount. This is where secret tactics come into play to mislead businesses into purchasing energy contracts that actually had them paying hidden commissions each month to their chosen TPIs.
The hidden commissions game
As the name might suggest, hidden commissions arise when energy brokers aren’t disclosing the extra money they’re receiving from the deal to the customer. Whilst it’s common for brokers to receive fees or commissions for their services, the problem arises when they’re not completely honest about it.
Energy brokers or TPIs may tell customers that they work under an “introducer’s fee” but this is misleading and in reality, they’re likely in agreement with the energy company to gain financial incentive for steering customers towards a specific contract.
Getting a monetary boost for doing a deal doesn’t sound like the worst thing in the world – that’s how commission works, right? Not in this case, that’s classed as a hidden commission and there’s a good reason they’re keeping it hidden – it’s coming straight out of the customer’s pocket.
These ‘financial incentives’ or undisclosed commissions are typically tied to the length of the contract and volume of energy purchased.
This lack of transparency is hugely unethical and leaving customers in the dark about the commissions their brokers are receiving can leave them in a major financial mess. Many small and medium-sized businesses have noticed the impacts of this first-hand, with some of them forced to close down due to being unable to keep up with their bills.
How undisclosed energy commissions work
So, how do energy brokers manage to keep their commissions a secret without customers catching on?
To better understand the inner workings of the sophisticated scam, let’s break down the process into a few key steps:
- It all starts with the broker-provider relationship whereby energy brokers establish relationships with various energy companies. They may strike deals which involve exclusive agreements or preferential treatment for sending customers their way.
- Energy brokers will then start to engage with businesses that require their services, asking them to detail their energy needs and budgets. It’s then their responsibility to match them up with a provider that can meet their needs.
- The broker’s contract recommendation is critical at this stage, and the customer trusts them to recommend a company based on their preferences. However, this is where they’ll persuade the business to sign up for one that gets them a personal financial incentive.
- Once the customer agrees to the recommended contract, the broker facilitates the deal and the customer signs the contract without any knowledge of commissions or fees the broker is receiving.
- Once the deal is done, the broker receives their commission payout and the customer continues to unknowingly pay for it month after month.
And that’s how easy it is to fall victim to undisclosed energy commissions. Whilst the commission is received directly from the energy company, it’s usually weaved into the price the business is paying for its contract. So if it’s not coming out of their bank account as an extra transaction, they’ll never notice.
The regulatory landscape
Whilst undisclosed energy commissions have already caused catastrophic consequences for millions of companies, the government and regulatory bodies are increasingly aware of the issues and are actively taking steps to protect businesses.
The Office of Gas and Electricity Markets (Ofgem) has introduced regulations to increase transparency and protect businesses from misselling. In their Code of Practice for non-domestic TPIs, they state that brokers must carry out any actions in a fair, honest and transparent manner.
So, there is hope for businesses entering into new energy contracts but that’s of little help to those who have already been affected by the scam. However, if you believe your business may have been overcharged on its energy contract due to hidden commissions, you can still claim compensation.
Claiming for undisclosed energy commissions
FDM Solicitors are experts in pursuing undisclosed energy commission claims on your behalf, on a no-win no-fee basis.
We’ve represented hundreds of organisations who are eligible for claiming against hidden broker commissions, including those who have had to close down due to the financial impact. We can help you make a claim even if the broker you used is no longer trading.
The amount you can claim will be dependent on the contract and how much the commission amounted to. As an affected customer, you may be entitled to repayment of the secret commission plus interest.
Time limits can apply in claims of this type, so if you want to start a claim, we can guide you through the process to check if you’re eligible and will support you throughout the whole process. Start your undisclosed energy commissions claim today.