Ofgem takes action on ‘unscrupulous’ UK energy brokers | Business
The energy regulator has vowed to crack down on “unscrupulous” brokers that have overcharged charities, community sports clubs, and care homes for their energy by hiding their inflated commission charges.
Ofgem set out the plans to help prevent more than a million microbusinesses from being ripped-off by unregulated energy brokers after finding that some were paying thousands of pounds more than they needed to.
The plans included new responsibilities for energy suppliers to monitor the conduct of the brokers that sold their energy deals, and to make sure that commission fees and key contract details were more transparent.
The new measures have emerged after a Guardian report earlier this year revealed that energy brokers had been left to overcharge thousands of small businesses by an estimated £2bn because, unlike brokers selling mortgages or insurance, they were unregulated.
Ofgem’s review of the energy broker market confirmed that many energy market middle-men have sold inflated energy deals on behalf of major energy suppliers, which include hidden commissions of up to 50%.
Microbusinesses, charities and public bodies spend a total of about £25bn to cover their energy bills every year, of which almost two-thirds is bought through energy brokers.
Gillian Guy, the chief executive of Citizens Advice, said Ofgem’s proposals were good news for the UK’s 1.5m 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,” she said.
“As well as these changes, Ofgem must make sure microbusinesses struggling with debts are treated fairly by suppliers in the months ahead,” she added.
A report submitted to the Ofgem review by Business Energy Claims (BEC), and seen by the Guardian, found that 90% of microbusinesses using an energy broker may have fallen prey to misselling because there is no official regulation in place to protect them.
Philippa Pickford, a director at Ofgem, said that providing greater transparency and “tackling unscrupulous brokers” would help microbusinesses “get a better, fairer energy deal”.
“This is more important than ever as microbusinesses emerge from the challenges posed by the Covid-19 pandemic,” she added.