Government and Ofgem act to rein in unscrupulous energy brokers to ‘empower’ UK SMEs

Small businesses, including care homes, charities, and faith groups, are set to benefit from enhanced protections against unscrupulous energy brokers who exploit opaque deals to pocket hidden commission fees.

These measures represent a significant stride by the government and industry regulator to rein in unregulated energy brokers amid mounting concerns over predatory sales practices and undisclosed commissions, which have burdened small businesses with inflated costs.

In a landmark move, companies with fewer than 50 employees will gain access to free redress and support from the energy ombudsman, facilitating the resolution of disputes with suppliers over exploitative energy deals without resorting to costly legal proceedings.

Amanda Solloway, Minister for Affordability and Skills, hailed the reforms as an “empowerment” of small businesses, ensuring that “rip-off energy brokers have no place in our market.”

The energy regulator, Ofgem, will extend its regulatory purview to encompass businesses with more than 10 employees, enabling it to take action against suppliers that fail to treat small business customers equitably, effective from this summer.

By the year’s end, Ofgem will compel all suppliers to disclose any fees and commissions paid to third-party brokers in their energy agreements. Additionally, suppliers will be mandated to engage exclusively with accredited brokers participating in a customer redress scheme.

Despite nearly a third of companies with business energy contracts employing brokers to secure deals, these intermediaries have largely operated without oversight, unlike their counterparts in mortgage or insurance sectors.

Tim Jarvis, Ofgem’s Director General for Markets, emphasised that many businesses have faced challenges with energy suppliers and encountered difficulties securing suitable contracts. “These new regulations will help ensure businesses receive the service they deserve,” Jarvis affirmed.

Last year, it emerged that business associations representing over a million small enterprises had urged Ofgem to crack down on energy brokers targeting the sector, which sustains nearly 13 million jobs nationwide.

Legal experts at Harcus Parker and Leigh Day, firms spearheading class-action lawsuits against energy suppliers, estimate that small businesses could be entitled to claim back up to £2 billion in undisclosed commissions.

Jarvis pledged, “We will engage with businesses of all sizes as these regulations are implemented throughout the year to ensure compliance by suppliers.”