Beginners Guide to Energy Mis-selling

Mis-selling of energy is a big problem. It is hard to believe that rogue ‘energy brokers’ are a serious threat to the UK economy, sounding more like the plot of a low-budget spy thriller than anything else. It is somewhat shocking then that these rogue brokers have conned small businesses from an estimated £2 billion through unscrupulous means. Source There are three main techniques to look out for to identify rogue traders.

Mis-selling

It may be surprising to know that energy brokers aren’t actually legally obligated to offer the best deal to customers. This leaves rogue energy brokers free to pass-off contracts that provide themselves with the most money as the ‘best’ for the customer. This can be through contracts that offer high broker’s commission, or unsuitably long contracts.

Lack of transparency

Energy brokers will sometimes not clearly present their contractual fees and charges to customers – do you know how much rogue brokers will profit from your monthly energy bills? Most people don’t. They are also not obligated to scour the market for the best provider and can present a select few as the only options. Often these are the ones that offer the largest margins for the broker.

Misrepresentation

Another common tactic used by rogue brokers is to falsely identify themselves so that customers believe they are operating on the behalf of a supplier. This is a good way of exerting pressure onto businesses to change contracts that suit rogue brokers.

 

To a lot of people, this is new information – which makes it even more shocking how widespread this issue is. Of the 3,000 energy brokers operating within the UK less than 10% have registered to be self-regulated. This leaves the other 90% free to do as they please. Every business is fair-game for these rogue energy brokers – who have targeted care homes, churches, and charities in the past. Real-world examples of energy broker malpractice include Stranton Social Club in Hartlepool who paid a whopping 41% of their total energy bill to their broker in hidden commission fees. source This figure is not uncommon, with businesses often paying up to 50% of their total energy bill in commission.

Ofgem has been aware of this issue for years. They put forward plans aimed at protecting small-businesses from this malpractice as early as 2014. These plans have since been dropped after finding inconclusive evidence of malpractice. Recently the energy market has become saturated with new entrants all wanting a slice of the un-regulated profit pie.

However, it’s not all doom and gloom. In 2020 Ofgem returned with increased vigour announcing new suggestions on how to improve the energy retail market. With the introduction of smart metering, increased support for customers, and faster more reliable switching it is hoped that there will be a real impact in tackling rogue energy brokers. This includes a new two-week cooling-off period for any businesses with a new energy supplier, giving them the freedom to reconsider the terms of the contract. Also, a new dispute resolution service for any unhappy customers will mediate discussions between energy brokers and dissatisfied customers. source These measures should hopefully redistribute the unequal power dynamic between rogue brokers and customers.

If you are worried you may fall victim to malpractice the most important thing to do is to complete your own research – this should give a good idea of how much providers actual charge for energy provision which should also make it easier to identify if and when there are hidden costs within a contract. Be vigilant for high-pressure sales pitches as often this is a good sign that you are being pushed a contract that is beneficial for the broker.

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