Litigation law firm Harcus Parker began sending letters before action to energy companies last week. This was the first step in group litigation to reclaim undisclosed commissions paid by suppliers to brokers without customers’ knowledge.
Gas and electricity suppliers have been accused of offering payments to incentivise brokers to sign up customers. This ignored whether energy was or was not cheaper to the end user, who was unaware of how much money was being distributed to the broker.
Businesses, schools, faith groups, charities, sports groups, care homes, local authorities and other community organisations are all said to have been targeted by brokers.
In some cases, the payments had allegedly inflated bills by 50% in a practice that appears to have developed over the past 20 years.
The Ship Centurion licensee Roland Birks is among hundreds of claimants who had signed up for action. Birks, who has owned the pub in Whitstable, Kent since the age of 18, said he took out his current electricity contract after being “hounded” by calls from brokers many times a day. “You’re getting bombarded and it’s very confusing,” he added.
He said he was paying between £900 and £1,200 a month under his previous deal, which expired in November.
When Birks signed his next contract, he was shocked to see the unit price had jumped to 63p per kWh from the 15p per kWh he had previously paid.
The licensee said the broker did not mention how much commission it would receive, only that it would be paid by the energy supplier, but Birks fears he will ultimately bear the cost.
He has yet to receive a bill under the new contract, but while government subsidies are helping for now, he fears the cost will at least double.
“Another £3,000 or £4,000 a month would not be sustainable. I’d have to look at getting rid of staff, closing the kitchen and doing more myself,” he said.
Harcus Parker estimates that if commissions were not properly disclosed, Birks could be eligible to claim back up to £16,500.
The litigation is being launched as the Government scales back subsidies given to of businesses under the Energy Bill Relief Scheme. From April, most non-domestic energy customers will receive a subsidy of just 2p/kWh.
Harcus Parker senior partner Damon Parker said: “Pubs are large consumers of energy and we are very aware that the increase in gas and electricity bills has hit them particularly badly. For some, it could be the final straw that leaves them no choice but to close their doors.
“Thousands of pubs across the country will unknowingly be paying more for their energy than they should because many suppliers increased the cost of their gas and electricity bills to pay secret commissions to the rogue brokers that introduced them.
From next month, he added, many would be paying a higher amount to brokers in undisclosed commission than they would be receiving from the Government’s latest energy subsidy.
He continued: “Many are telling us that the increase to their energy bills caused by these secret commissions will have wiped out their profits or, worse, forced them to shut for good.
“We hope that if we can help pubs recoup some of these secret commissions from the energy companies it will help to alleviate their problems.”