Is Your Energy Broker Doing You Your Best Deal?

Secret commissions totalling tens of millions of pounds a year are being paid to 'independent' brokers by energy suppliers to pull in lucrative business from small and medium-sized companies.

The undisclosed payments mean that a large part of the energy market is effectively rigged.

The commissions can often amount to as much as 20 to 30 per cent of clients' annual gas and electricity bills. And in some cases brokers force suppliers to sign nondisclosure agreements so they never talk to customers about the commissions they are paying.

The close ties between suppliers and brokers mean that it is rare for intermediaries to secure the best possible deal for their client.

The disclosure comes as major suppliers have just fended off the imposition of a windfall tax and are battling to minimise the impact of having to pay more to help hard-up families cope with spiralling heating and lighting bills.

One industry insider said: 'Some brokers are ripping customers off for vast sums. And their actions are reducing competition because they will go only to suppliers who pay commissions, which means in some cases they seek quotes from only a third of them.'

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Pre-payment Meters a Good Deal???

BBC Business News - Energy companies 'exploit poor'

Energy companies have been accused by an industry watchdog of exploiting some of the poorest people in society. Customers with pre-payment meters are paying hundreds of pounds more for electricity and gas than those with access to the cheapest tariffs.

According to Energywatch, some people cannot take advantage of lower tariffs because they do not have bank accounts.

Customers on the meters are charged an average of £195 more a year than those paying by direct debit, it says. In some cases, customers using meters have been found to pay as much as £304 more a year.

The cheapest tariffs are typically available to those who apply online and pay by direct debit.
'Morally bankrupt'

Many consumers prefer to use pre-payment meters to pay for gas and electricity.
It allows them to budget and to pay as they go along rather than face an unwelcome bill. But others have no option.

"That they should ramp up the rates and exploit those with no access to alternative payment methods is morally bankrupt," said Energywatch chief executive of Allan Asher.

The industry regulator Ofgem says companies install pre-payment meters when a customer has difficulty managing their energy bills. They are common in rented accommodation and holiday homes. There are 3.5 million electricity and 2.2 million gas pre-payment meters in Britain.

More meters

Energywatch claims that the number of meters being installed each year has been rising due to soaring energy bills.

Some 580,000 pre-payment meters were installed in 2006. Energywatch claims that 63% were installed by companies to recover debts, which would limit the ability of those households to switch to cheaper suppliers or payment methods. The industry also argues that pre-payment tariffs tend to be higher because of the expense of maintaining the meters and the payment system.

Ofgem calculates that the additional cost of providing gas or electricity by pre-payment is £85 per household.

But according to Energywatch, even after these costs are taken into account, the industry is making close to £300m a year in revenues from customers on pre-payment meters.

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Firms 'need fairer energy deals'

UK businesses need to be offered help in dealing with energy companies, the British Chamber of Commerce says.

Firms, especially small and medium sized enterprises, are more vulnerable to exploitation by energy suppliers than domestic customers, the BCC added.

It called on energy regulator Ofgem to examine why businesses must have long term deals with suppliers while other customers can switch every 28 days.

There is no law forcing business suppliers to publish tariffs, it said.

And the BCC added it was wrong that domestic consumers had a "cooling off" period on verbal contracts, while such agreements which were immediately binding for business.

Its director general, David Frost, called for a current probe by Ofgem to hold suppliers to account over the "lack of transparency and fairness" in their dealings with firms.

'Unacceptable'

Watchdog group Energywatch received 32,000 calls every year from businesses seeking help and advice on their energy supplies.

And the BCC said it feared that this demand would not be met when Energywatch became part of a larger body, Customer Focus, from 1 October.

This would leave firms at the "mercy" of suppliers, so a new independent watchdog is needed to handle their energy concerns, the BCC said.

Rising energy bills have added to inflation which, alongside slowing growth, is adding to fears that the UK economy may face recession.

"With the economy slowing and energy bills on the rise it is totally unacceptable that hard-pressed businesses are left so open to exploitation by energy suppliers," Mr Frost said.

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