Microbusinesses buying energy paying too much to middlemen

30 July 2020

UK energy regulator Ofgem has proposed a package of regulations to prevent middlemen racking up huge fees from microbusinesses buying energy.

The proposals include obliging energy suppliers to ensure brokers they work with sign up to a dispute resolution scheme and conduct themselves appropriately.

Sales and marketing rules governing energy suppliers and brokers will be made more transparent under the proposals.

Brokers will also be obliged to be transparent about commission payments on contracts, bills and account statements.

Ofgem said two out of three microbusinesses used an energy broker to choose their current energy contract.

But an investigation found in many cases a lack of transparency meant microbusinesses ended up being locked into poor value deals, paying thousands of pounds more than they needed to in broker commission charges.

The proposals call for a 14-day cooling-off period for microbusiness contracts and require suppliers to maintain existing contract rates for up to 30 days while a switch is being processed.

Energy suppliers will no longer be able to force microbusinesses to provide notice of their intent to switch providers.

Philippa Pickford, Ofgem’s director of future retail markets, consumers & markets, said: “Providing greater transparency and tackling unscrupulous brokers will 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.”

Examples of bad practice included a broker who had claimed they would search the whole market for a golf club but eventually only offered them one deal which contained a hidden commission of 50% of the golf club’s energy spend.

In another case Stranton Social Club’s energy bills included a 41% commission to a broker, which had not been disclosed in the contract or in bills. 

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