A Bromley entrepreneur is among millions of businesses and community organisations that lawyers say could be entitled to compensation from UK energy giants over alleged secret commissions paid to third-party brokers, inflating customers’ bills by billions of pounds.
Leading litigation law firm Harcus Parker last week began sending letters before action to energy companies in the first step in group litigation to reclaim undisclosed commissions paid by suppliers to brokers without customers’ knowledge.
Gas and electricity suppliers are accused of offering these payments to incentivise brokers to sign up customers, ignoring whether energy is or is not cheaper for the end user, who is unaware how much money is being siphoned off to the broker.
Small- and medium-sized businesses, schools, faith groups, charities, sports groups, care homes, local authorities and other community organisations are all said to have been targeted by unscrupulous brokers.
In some cases, the secret payments have inflated bills by 50% in a practice that appears to have developed over the last 20 years.
Harcus Parker says this failure to disclose the cost of commissions means that customers are entitled to sue energy firms to reclaim the sums paid, which, under common law, constitute a “bribe” to the broker.
Businesswoman Nimisha Raja is among hundreds of claimants who have already signed up for the action.
Ms Raja, 59, started Nim’s Fruit Crisps 12 years ago in her kitchen and now has a 10,000 sq ft factory in Sittingbourne, Kent.
She employs 20 people and supplies Tesco and restaurant chains including Wagamama, Zizzi and Pret a Manger with her air-dried healthy snacks.
She felt “backed into a corner” when she signed up for gas through an energy broker in November 2021, adding: “No broker has ever mentioned commission to me.”
Ms Raja, who lives in Bromley, has noticed a hefty rise in the price of gas, the company’s biggest cost, since signing the three-year deal after her previous supplier went bust.
Her monthly bill soared from between £2,500 and £3,000 to about £15,000. It has now settled at between £5,000 and £6,000.
She said was annoyed that secret commissions could have inflated this bill. “It impacts the business. We can’t pass it on to the customer, so we have to absorb it,” she said.
“It’s a really difficult time, but you can’t survive without energy.”
Harcus Parker estimates that if commissions were not properly disclosed, Ms Raja could be eligible to claim back £18,000.
The litigation is being launched as the Government drastically scales back subsidies given to millions of struggling businesses and community organisations under the Energy Bill Relief Scheme. From April, most non-domestic energy customers will receive a subsidy of just 2p/kWh.
Damon Parker, senior partner of Harcus Parker, said: “Thousands of businesses and community organisations across London will unknowingly be paying more for their energy than they should because many suppliers increased the cost of their gas and electricity bills to pay secret commissions to the rogue brokers that introduced them.
“From next month many will be paying a higher amount to brokers in undisclosed commission than they will be receiving from the Government’s latest energy subsidy.
“Many are telling us that the increase to their energy bills caused by these secret commissions will have wiped out their profits or, worse, forced them to shut for good.
“We hope that if we can help them recoup some of these secret commissions from the energy companies it will help to alleviate their problems.”
It is calculated that, at any one time, around two million non-domestic customers are paying these fees. The malpractice began as far back as 2003, meaning millions of customers will be eligible to join the claim.
Harcus Parker, which has already signed up several hundred claimants, says that the average claim is currently around £20,000 per customer and that long-term contracts for heavy energy users could give rise to claims of well over £1m.
It has in excess of £10m of litigation funding to fight the case and believes the total amount owed by the energy companies could top £2bn.
Mr Parker added: “The claims are fully funded and insured and, as a result, we are able to act for clients who ordinarily would not have the resources to access justice in a claim of this kind, on a ‘no-win, no-fee’ basis.
“I would urge all non-domestic energy customers who have used a broker to source their energy supply and were not told how much and how their broker would be paid to see if they are eligible to claim.”
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