OFGEM has promised to crack down on brokers who take as much as 50% of a business’s energy bill in commission to set them up with a supplier.
The energy watchdog said it would “tackle unscrupulous energy brokers” to help millions of tiny businesses get better deals.
It said that while many of the two-thirds of microbusinesses which use a broker to get a deal benefit from the arrangement, a large number do not.
“In too many cases, microbusinesses are hampered by a lack of transparency when using brokerage services and end up being locked into poor-value deals because they are not fully aware of what they are signing up to,” Ofgem said as it unveiled new plans to help regulate the sector.
Some businesses are paying thousands of pounds more than they need to in broker commission charges, the watchdog said.
It cited the example of a golf club whose energy deal contained a “hidden” commission of 50% of its energy bill. The golf club is estimated to owe £24,000 in these hidden fees.
Meanwhile, 41% of the energy bill for Stranton Social Club in Hartlepool went to its broker in commission that had not been disclosed to the club either at the point of sale, or on bills or the contract.
READ MORE: Renewable energy made up 90% of Scots electricity usage in 2019
Philippa Pickford, right, Ofgem’s director of future retail markets, consumers and markets, said: “Providing greater transparency and tackling unscrupulous brokers will help microbusinesses get a better, fairer energy deal,” said.
“This is more important than ever as microbusinesses emerge from the challenges posed by the Covid-19 pandemic.
Around 1.5 million of Britain’s 5.6m microbusinesses are expected to benefit from Ofgem’s new proposals – many of which bring the business deals closer in line with the protections afforded to domestic customers.
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