Ofgem, the energy industry’s regulator, has put in place plans that hope to stop energy brokers overcharging small businesses and local bodies. It has been reported that some unethical brokers have been overcharging care homes, charities and community sports clubs for their business energy bills by hiding their inflated commission charges. Ofgem has vowed to crack down on this “unscrupulous” behaviour.
Plans have been set out by the energy watchdog to stop more than one million microbusinesses from being taken advantage of. Some brokers were found to be charging a number of companies thousands of pounds on top of their normal business electricity rates.
Under the new plans, energy suppliers will have additional responsibilities to ensure that they monitor the conduct of the brokers they sell their energy tariffs to. Furthermore, important contract details as well as commission fees must be made far more transparent. This will help SMEs better understand what their bills consist of by including a provided breakdown of the charges.
Earlier in 2019, a Guardian report identified that energy brokers were overcharging thousands of small businesses by an estimated £2billion. This was primarily due to being unregulated unlike most brokers that already sell insurance and mortgage products to customers.
A number of energy market middle-men have sold inflated energy tariffs on behalf of a range of major energy suppliers, according to a review of the energy broker market by Ofgem. Shockingly, these deals included hidden commission fees of up to 50%.
A total of around £25billion was spent by charities, microbusinesses and other public bodies to cover the cost of their annual energy bills. A large proportion (nearly 66%) was bought through energy brokers.
Gillian Guy, Citizens Advice chief executive, said Ofgem’s proposals were great news for the UK’s more than 1.5million microbusinesses. “Our research showed how the actions of unscrupulous brokers can lead to microbusinesses paying more than they need to, being aggressively pursued for debts and being needlessly disconnected.”
“As well as these changes, Ofgem must make sure microbusinesses struggling with debts are treated fairly by suppliers in the months ahead,” she added.
Around 90% of microbusinesses who used an energy broker may have fallen prey to mis-selling because there is no official regulation in place to protect these companies, according to a report submitted to the Ofgem review by Business Energy Claims (BEC).
Philippa Pickford, one of the directors at Ofgem, said that offering increased transparency and “tackling unscrupulous brokers” would help microbusinesses “get a better, fairer energy deal”.
She added that: “This is more important than ever as microbusinesses emerge from the challenges posed by the Covid-19 pandemic.”
The coronavirus crisis meant that millions of businesses were forced to shut and employees were asked to work from home where possible. This has had a significant impact on the UK economy, and the full effects will be felt in the months and years ahead.