Suppliers face legal action over ‘hidden’ broker fees

Energy retailers, including British Gas, EDF and Scottish Power, are facing legal action over their alleged payment of hidden commissions to energy brokers.

JMW Solicitors said it is planning launch a case in the “coming months” on behalf of hundreds of microbusinesses, which were recommended “high cost” long-term energy deals by brokers.

The firm claims the commissions, which were paid without the full knowledge and consent of customers, often made up a “significant portion” of their energy bills.

If successful, JMW said the test case could enable the millions of other businesses that use energy brokers to reclaim commissions as well.

Graham Small, a partner in JMW’s commercial litigation team, compared the arrangements to the misselling of payment protection insurance by mortgage lenders, saying the total compensation claims could “run into many millions, if not billions.”

“Brokers received a commission from energy suppliers for recommending long-term fixed priced deals to business, but those brokers did not inform their clients of the commission properly or at all,” explained Small.

“Often commissions were hidden in energy bills by being included in the customer’s tariff. In the more serious cases, these commissions are viewed as a bribe entitling customers to compensation.”

He continued: “There are cases where the brokers’ commission makes up a significant portion of total energy costs of a business, adding significant sums to that business’ annual bill.”

JMW said it took on the case after being approach by nightlife entrepreneur Sacha Lord, who successfully challenged government hospitality rules during the Coronavirus lockdowns.

“This does feel like a huge David and Goliath moment but if we can make a difference for millions of businesses across the whole of the UK including the hospitality sector who have been hit hard by energy costs then I absolutely will do it,” said Lord.

JMW has urged business that believe they may have been affected to submit their details on its website to see if they are able to register a claim.

The suppliers named by the firm have not yet responded to a request for comment.

In October 2022, Ofgem introduced new licence conditions requiring suppliers to declare commissions being paid to energy brokers from customers’ bills in the terms of their contracts.