Small businesses such as care homes, and enterprises including charities and faith groups, will be granted new protections to guard against rogue energy brokers using rip-off deals to secure hidden commission fees.
The measures mark the first big step by the government and the industry regulator to bring unregulated energy brokers to heel after a growing outcry over aggressive sales tactics and undisclosed commissions, which have inflated costs for small businesses.
The government said that for the first time companies with fewer than 50 employees would be able to access free redress and support from the energy ombudsman to help resolve disputes with suppliers over rip-off energy deals, without costly court procedures.
Amanda Solloway, the minister for affordability and skills, said the change would “empower” small businesses and make sure that “rip-off energy brokers have no place in our market”.
The energy regulator, Ofgem, will expand its existing rules to include businesses with more than 10 employees so it can take action, from this summer, against suppliers that do not treat small business customers fairly.
By the end of the year Ofgem will force all suppliers to disclose any fees and commissions paid to third-party brokers through their energy deals. Suppliers will also be required to work only with accredited brokers which are signed up to a customer redress scheme.
Almost a third of companies with a business energy supply contract use a broker to secure their deal, but – unlike the intermediaries who market mortgages or insurance deals – these energy middlemen are largely unregulated.
Tim Jarvis, Ofgem’s director general for markets, said too many businesses had experienced problems with energy suppliers and difficulty getting the right contracts. “These new rules will help ensure businesses get the service they deserve,” he said.
The Guardian revealed last year that business groups representing more than a million small businesses had written to Ofgem calling for a crackdown on energy brokers targeting the sector, which employs almost 13 million people across the UK.
Lawyers at Harcus Parker, and Leigh Day, two firms that have launched class action lawsuits against energy suppliers, believe that small businesses may have the right to claim back up to £2bn in hidden commissions.
Jarvis said: “We’ll be speaking to businesses of all sizes as these rules come into force throughout this year to make sure they are being followed by suppliers.”
