UK businesses are grappling with an additional 10% average cost for gas and electricity, as revealed by a prominent litigation law firm in a new report.
The firm, Harcus Parker, is leading a collective legal action involving thousands of small enterprises seeking to recover up to £2 billion in undisclosed broker fees added to their energy bills.
The undisclosed commissions, sometimes reaching 60% of energy costs, are exacerbating the challenges faced by small businesses dealing with surging energy prices, a situation further intensified by Russia’s reduction of gas supplies to Europe following the Ukraine invasion.
Harcus Parker alleges that over a million small businesses may have paid inflated prices over the past decade due to suppliers incorporating “secret” fees or commissions from energy brokers into their bills. These fees are often not disclosed on customer bills, making it challenging for businesses to identify or contest the additional charges.
Damon Parker, a partner at Harcus Parker, expressed astonishment at the significant impact these undisclosed commissions have had on customer bills, emphasizing the need for transparency. The typical broker commission, approximately 1.7p per unit of energy, adds an estimated 10% to the total energy bill for small businesses availing broker services.
The law firm is urging the energy regulator to enforce transparency on fees passed on to customers by suppliers. While regulations introduced since October 2022 mandate disclosure of charges to “microbusiness” customers, slightly larger small businesses lack the same protections.
Harcus Parker’s call for transparency aligns with Ofgem’s recent actions. The energy regulator has sought government intervention to regulate energy brokers, recognizing concerns about unregulated third-party brokers taking advantage of small business owners. Ofgem has also closed a consultation on plans to compel major energy companies to disclose rates covering broker fees.
The Federation of Small Businesses has supported these efforts, asserting that brokers have imposed hidden commission fees running into billions on bills for companies, charities, care homes, and faith groups. Additionally, concerns have been raised about brokers locking businesses into long-term energy deals at peak global market prices.
While welcoming Ofgem’s recent moves, Harcus Parker emphasizes the necessity of further transparency, suggesting a lump sum disclosure of brokers’ commissions to enhance understanding and protect companies from potential financial exploitation.