The cost of gas and electricity for businesses was inflated by around 10 per cent, on average, after energy giants secretly added third-party broker commissions to customers’ bills.
More than 5,000 businesses and organisations have joined the class action lawsuit, launched by law firm Harcus Parker, which is trying to recoup up to £2 billion of undisclosed broker fees.
The law firm says these undisclosed broker commissions were added onto the unit cost of gas and electricity, falsely inflating energy prices for up to two million businesses in the UK.
Customers were unaware how much of their energy bill was being inflated by these secret commissions, the law firm said.
Businesses from a wide variety of sectors have joined the claim from manufacturers, high street stores and pubs to community organisations, faith groups and charities.
Harcus Parker says its research has revealed that energy firms, on average, added a cost of 1.7p to each unit of gas and electricity to pay brokers’ commissions.
It says this additional amount was frequently paid during a time when the cost of energy was only 10p per kWh or even less.
The law firm has found some brokers were allowed by suppliers to add as much as 6p per kWh.
The average claim for each non-domestic customer currently stands at £5,000.
News of the secret broker commission costs comes after Ofgem today closed a consultation process for a proposal to make it a requirement for all non-domestic customers to be told how much of their unit price of energy is made up by a broker’s commission.
Damon Parker, partner at Harcus Parker, said: “We’ve examined thousands of bills for customers joining our claim and it’s been quite shocking, in percentage terms, how much these secret commissions have added to their bills.
“When you hear they’ve added 1.7p per unit in third party broker costs it doesn’t sound much but if you’re only paying 10p per unit in total for your energy that’s a hefty percentage. On average, it works out at about ten per cent.
“It means many businesses are owed thousands of pounds. Some institutions and businesses with high energy costs are owed tens of thousands of pounds.
“We’ve been calling on Ofgem to make these broker costs transparent for all-non-domestic energy customers for nearly a year and we’re delighted that they’ve finally listened. That said, others were raising this issue of secret commissions ten years ago so I’m not sure why it has taken so long.
“It seems some brokers were more interested in getting themselves the highest amount of commission possible rather than getting the customer the best financial deal.”
Since October 2022, brokers and energy firms have been required to disclose commission amounts to ‘micro-business’ customers, which have a turnover of less than £1.8 million. Ofgem’s proposal would extend this requirement to all non-domestic energy customers.
Harcus Parker has written to Ofgem as part of the consultation process asking that, as well declaring how much cost is added in broker commission to each unit, that a total estimated lump sum of this expense should be stated on the bill.
Mr Parker added: “People see a figure of 1p or 2p per unit and think nothing of it but if this amounts to thousands of pounds over the course of a fixed contract that really help open customers’ eyes.
“We think a lump sum amount of how much brokers’ commissions will cost firms and organisations will add another layer of transparency.”
Ofgem has been contacted for comment.
