Exclusive: Move follows outcry from small firms, charities and others about hidden commission fees
Rogue energy brokers are to be brought to heel by the industry regulator in a crackdown seeking to stop small firms being ripped off by their strongarm tactics and hefty fees.
Under proposed rules to be put forward by Ofgem on Wednesday, energy suppliers would be forced to come clean on the billions in secret broker commissions they load on to business contracts.
The Guardian understands the regulator will also call on the government to introduce legislation allowing it to clamp down on energy brokers directly by bringing them under its regulatory remit for the first time.Read more
The measures follow an outcry from small businesses including charities, care homes and faith groups that fear that billions in hidden energy broker fees have compounded the energy and inflation crisis by jacking up bills.
The Guardian revealed earlier this week that trade groups representing almost 1m small businesses had come together for the first time to call on Ofgem to crack down on the rogue energy brokers.
Eight small business bodies – including UKHospitality, Care England and the British Retail Consortium – wrote to the regulator to warn that if it continued to “fail the business community by allowing this exploitation to continue” they would raise their concerns directly with the government.
Almost a third of companies that use a business energy supply contract use a broker to find a deal, but unlike the middlemen who market mortgages or insurance deals, the energy intermediaries are largely unregulated.
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Ofgem is expected to publish a review into the energy market for small businesses on Wednesday alongside a string of proposals designed to protect companies from predatory broker behaviour and give them recourse against suppliers and middlemen for unfair gas and electricity deals.
In addition to demanding full disclosure of broker fees, Ofgem will insist that suppliers improve how they deal with complaints from small businesses and stop overcharging firms that have not struck a deal with a supplier.
Sacha Lord, Manchester’s night-time economy adviser to the city’s mayor, Andy Burnham, said Ofgem’s proposals would be “a major step forward” in protecting small companies “against energy companies who have not been as transparent as they could have been”.
He said: “Every week we are being contacted by restaurants, pubs and bar owners up and down the country – the backbone of our hospitality sector – who simply cannot see a viable way forward.”
The regulator will also call on the government to change legislation so that small companies can, like household customers, have access to the energy ombudsman’s services.
The regulator has promised for at least 10 years that it would take action against brokers that lock companies into poor-value contracts.
In 2020, after its last review, Ofgem said suppliers would have to disclose how much they were paying brokers in commission but only in contracts for “microbusinesses” of nine or fewer employees. The measure was not extended to small businesses of 10 or more employees, which include many care homes, charities and independent restaurants.