Energy companies face £2bn legal claim over businesses paying 'secret commissions' to brokers

Litigation law firm Harcus Parker began sending letters before action last week to energy companies including British Gas in the first step in a group litigation, with similar letters of claim set to be issued to E.ON, SSE and Opus, among others. 

Gas and electricity suppliers are accused of offering payments to incentivise brokers to sign up customers, ignoring whether energy is or is not cheaper for the end user who is unaware how much money is being distributed to the broker.

In some cases, the secret payments have allegedly inflated bills by 50% in a practice that Harcus Parker says appears to have developed over the last 20 years. 

Restaurateur Ray Stalker (pictured) is among hundreds of claimants who have already signed up for the action. 

He invested his life savings in Et Alia at The Red House in Chester, but fears crippling energy bills could be the final straw that forces it to close. 

Stalker says when he was introduced to a broker four years ago, he presumed they had shopped around to get him the best deal and commissions were never mentioned. 

“No-one had ever explained to us that the broker got a commission that we paid indirectly through the energy company’s inflated unit rates,” he says. 

Harcus Parker estimates that if commissions were not properly disclosed, Stalker could be eligible to claim back £17,000. 

“If brokers have been given secret commissions included within the unit rates charged by the energy companies to push up our bills further, then that is scandalous,” Stalker continues. 

“If we can get reimbursed, that money could ultimately be the difference between keeping the restaurant open and having to close the doors for good.” 

Soaring costs​

The litigation is being launched as the Government prepares to slash the level of energy support businesses receive​​. 

Wholesale gas and electricity prices are currently fixed for all non-domestic customers under the Government's Energy Bill Relief Scheme, which came into effect in October.

However, from April this will be replaced by a scaled back Energy Bills Discount Scheme, which will see firms get a discount on wholesale prices rather than costs being capped.

According to Harcus Parker, most non-domestic energy customers will receive a subsidy of just 2p/kWh under the new scheme. 

“Restaurants are large consumers of energy and we are very aware that the increase in gas and electricity bills has hit them particularly badly,” says Damon Parker, senior partner of Harcus Parker. 

“For some, it could be what finally forces them to close.

“Thousands of restaurants across the country will unknowingly be paying more for their energy than they should because many suppliers increased the cost of their gas and electricity bills to pay secret commissions to the rogue brokers that introduced them. 

“Many are telling us that the increase to their energy bills caused by these secret commissions will have wiped out their profits or, worse, forced them to shut for good. 

“We hope that if we can help restaurateurs recoup some of these secret commissions from the energy companies it will help to alleviate their problems.”

It is calculated that, at any one time, around two million non-domestic customers are paying these fees. 

Harcus Parker, which has already signed up several hundred claimants, says that the average claim is currently around £20,000 per customer and that long-term contracts for heavy energy users could give rise to claims of well over £1m. 

It has in excess of £10m of litigation funding to fight the case and believes the total amount owed by the energy companies could top £2bn. 

“The claims are fully funded and insured and, as a result, we are able to act for clients who ordinarily would not have the resources to access justice in a claim of this kind, on a ‘no-win, no-fee’ basis,” Parker adds.

“I would urge all non-domestic energy customers who have used a broker to source their energy supply and were not told how much and how their broker would be paid to see if they are eligible to claim.”

Energy companies respond​

In a statement, a spokesperson for British Gas said: “The relationship between a broker and a business customer is separate from their relationship with British Gas. All brokers operating in the market are expected to ensure that their terms and conditions comply with the relevant regulatory obligations on transparency.

“We offer business customers competitive prices if they come to us directly, and we have complied with the regulation regarding transparency disclosures at all times. Customers can also ask their broker at any time regarding the commission they are charging and we would encourage them to do that.”

An Opus Energy spokesperson said: “We treat compliance with our regulatory obligations with the utmost seriousness, including those governing the sale of electricity and gas to microbusinesses. From 1 October 2022, the commission that a customer might pay over the lifetime of their contract is disclosed prior to the customer entering into a contract. We comply with this regulatory requirement and we only work with Third Party Intermediaries who are registered with the Energy Ombudsman.”

An SSE Airtricity spokesperson said: “In March 2022, Ofgem introduced rules requiring brokers to disclose any commission payable. As a non-domestic supplier, we are confident we have conducted our business honestly, fairly and have complied with all regulations in the selling of energy to business customers that choose to engage with us through Third Party Intermediaries.”

BigHospitality has also contacted E.ON comment.